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Below are Fred's Weekly Reports with a brief synopsis of each. To view the full report, click on the title.
One of our favorite short-term breadth indicators is the McClellan Oscillator. It has built a bottom as well, but may need a bit more work, along with other indicators.
This “aggressively going nowhere” behavior is essentially causing the weekly indicators to come down and the market may be on “hold” until the overbought condition is further resolved on the weekly.
Last week’s corrective behavior brought daily indicators down into buy territory, but some weekly indicators may need a bit more time to set up an intermediate buy configuration.
Advisors have added some money per our instructions, and the question is obviously if this is the ultimate low of this correction? It certainly could be but the most important thing to us is that the risk now looks to be no more than 276 to 277.
It is probably a bit too early to suggest we are out of the woods, but at the same time advisors with new money or new clients can start to put people into their models. TLT has performed better than we thought it would on this move, but now it is in a position where the accumulation model does not support prices, and it is overbought.
A test of 285 to 270 is possible from here. That would be buyable as the long-term technical indicators continue to look positive.
While the behavior of small and mid remains a concern, there are enough positive indicators such as the advance decline line (at new highs!), and improvement in some of our weekly proprietary breadth measures that suggests the market actually looks reasonably attractive, within this summer doldrums period. If above 98, the dollar could test the highs of 2017 in the 105-area. This could become interesting for other markets, probably hurt stocks.
If we were going to short SPY, we would do a light position, try to get 302 or so, in front of the FED meeting or press conference on July 31st. We are seeing some signs of improvement in XLB and want to call this to subscribers’ attention.
For a while we have been concerned that the economy is stronger than many think it is. If this is the case, it is possible that the FED does not lower rates this week – or otherwise disappoints.
TLT is down, and close to a daily recycle. Assuming that occurs, failure to make a new high on that signal would suggest bonds are peaking. Accumulation models do not support higher prices on GLD. Unless below 25.80, we are bullish on UUP.
Our summer rally scenario has worked well enough, but it is time for traders to take some risk off the table, and investors to monitor positions and indicators closely.
While the $NYA chart still has not made new highs, much of the justification for Jeff Gundlach bearish position based on this index is gone, in our view. Until DB tests 10, it is still a downtrend and new price lows would suggest the restructuring will not work.
So far, it looks as if our summer rally scenario is under way. Part of that forecast is a tradable peak in late July, early August and while nothing is set in stone, I am starting to see some developments that could point to problems toward month end.
This is a short holiday week, so there will be no midweek, chart book or call unless something whacky happens with the markets. General advice here is to take some profits on bond positions and move that money into REITs or Preferreds.
As long as the 270 area holds on SPY, things are still positive for an advance into late July. A break of 130 on TLT would target 127, and a break of that would target 124.
GLD is up on a gap from 128 to 130. It is definitely overbought (especially short-term!) on some measures. This advance could continue, however, albeit a bit choppy from here.
Intermediate term, we could see the market up into July and if above the upper target range of 302 on SPY that would set up risk of a steeper correction.
As we move into the FED meeting this coming week, daily indicators are overbought and suggest some consolidation is likely. Weekly indicators on many of the indexes are down and in buy mode, suggesting that some “reload” in these short-term indicators is likely before another advance.
Indicators suggest the S&P 500 will stabilize in this area, and we would use weakness to add to some positions. Gold is a hold for us.
Small cap has been lagging, and the long-term trend system is negative here. We mention this because it was the first to go negative before the 2016 election as well. We have been looking for a significant low in oil around the second to third week in June, so the end of last week’s price action in crude oil was encouraging.
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