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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.
There has been a 50% retracement of the decline from 290 on SPY or so, and options expiration shenanigans suggest a test of 275 is possible – we would add money there as well as here on a down open. Trading objectives for GLD are 120, then 122, but this could be making a longer-term bottom.
These indicators suggest that a retest of 270 on SPY or so is likely but adding some money in this area should look very good a few months from now. We would buy some GLD on a flat to down open but not a big gap up. GLD targets are now 120, and above that 124 or so.
The market is quite oversold and is resolving this oversold condition. It still looks like more corrective action is coming.
The New Lows continued to expand relative to New Highs – this continues the negative trend we have seen over the last four weeks. Many breadth indicators such as the McClellan Oscillator have become short-term oversold and are trading near previous lows, but intermediate indicators are NOT oversold enough and suggest more downside is possible.
We have no real changes in our market opinions. we are interested in GLD if it can move above 115.
We now have four weeks of more new lows than new highs, and new lows expanded last week. This indicator continues to suggest caution. News from our contacts in Europe suggests there could be some problems in Greece and Italy so this is an area of concern.
We have no real changes in our stock projection, but there has been further deterioration. The daily stochastic on SPY is now negative. IPKW is a timely buy now.
There are breadth divergences in other indicators such as FBO’s, and even the McClellan Oscillator, one of our favorite trading tools. The ten day Trading Index (Arms Index) is around .80, classic sell territory. There is enough in these numbers to warrant a cautious stance as well. We do expect a surge in rates by the end of this year.
Overall, technical indicators have weak patterns and are diverging, but this action could go on for some time. Watch TYX, it has crossed the 31.50 area mentioned a few weeks ago and could test 32.50. If it moves higher this would be a major breakout.
The stock market rallied last week, again on negative New Highs and New Lows.
We should mention that West Texas Sweet Crude has hit our forecast price for the year by trading above 72. Our current forecast is that this should be a range between 64 and 75 or a little higher into 2019.
We repeat our benchmark numbers that suggest a market decline – 282, and then 278 on SPY. Penetration of those areas would be significant. This seasonal tendency works much of the time in oil. This implied weakness is supported by the position of the monthly stochastics that suggest some time, a few months at least, of choppy behavior. China seems close enough to a trading bottom, which could turn into a double bottom and retest into October.
What numbers are we looking for to suggest a correction is starting? A break of 282 would be weak, and a break of 278 would then target the 250 area. Should these occur, we will become quite cautious. Until then, higher prices are possible, and the top end of our target range at 302 for 2018 remains in range.
We have had some questions as to whether this is a major peak and we don’t think it is – but according to our work the risk is now higher for a pullback. We have sold weak stocks, and have recommended, and still recommend, holding onto the cash for now.
We still think it is possible that 290 on SPY is tested before there are any big problems with the market. We reiterate that this sets up a dangerous situation but is not an automatic sell signal.
Interesting, and overlooked by most of the market commentators, is that Transports (represented by IYT and XTN) are doing well, but the broader XTN failed to make a new high Tuesday.
Caution flags have been out for a while, and now they are waving in the breeze. In terms of the internal indicators the biggest concern we have is that on an up week in breadth, New Highs/New Lows had a negative reading.
Would we buy TUR here? Only as a speculation. The move in UUP is closer to a “pause that refreshes” than most people think.
We are sticking with our forecast of a new high for SPY prior to a significant correction.
A close above the January highs, say at 287 on SPY, sets up corrective behavior, we actually think this will be 290 or above. Advisors should continue to trim weak sisters, but a trading peak is not assured. The setup is occurring, and vigilance is needed.
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