Weekly Report

Bonds continue to rally, albeit more slowly than we would like to see.  GDX (Market Vectors Gold Miners ETF) has started a potential breakout.

We will continue to sell underperforming positions, and prepare for a more severe pullback, and while we still believe that should start later in August, but if we are a few weeks wrong about the timing this pullback could be starting now.

When the weekly on TLT becomes overbought, risk becomes high. SPY is above my summer rally target (630). Key downside supports are 616, then 611.

We have suggested beginning to put together a sell list of underperforming names, and we discuss some Dividend Stock ETFs as a way of getting a bit more defensive.  Some of the more defensive sectors are starting to do better.

SPY has hit our target at 630, and while the market still looks higher, we should now look for points to sell underperforming stocks, or at least parts of position in them.  Watch GLD – staying below 302 would suggest a peak in gold. SLV may be starting a blow-off top and right now the risk of a peak is increasing but it is not there yet.

We still think the end of the year will be higher than this, but we should be looking at underperforming holdings with a view towards building a sell list.  A move above 52 on TYX, and 50 on TNX heightens the risk of an advance in interest rates that could surprise the markets.

Stocks continue to look like typical options expiration shenanigans.  One thing that is a concern is the performance of TLT and TYX.  Watch TYX – a move above 52 would suggest problems for our thesis of the market rallying into mid-August.

We like the trading, with a pattern of down early in the week and a rally into the end of the week.  We would watch CPER to make sure it holds the breakout.

IJR and IWM are trading well, and still look like Head and Shoulders breakouts.  The only real concern we have is that TLT is weaker than we would like to see.

With both SPY and QQQ at all-time highs there could be decent follow through in spite of the tariff threats.  Bonds often make an important cycle low in October and given the patterns on the long-term quarterly charts of TNX and TYX, this coming October could be especially difficult.  Overbought readings on TLT (bond prices) going into the July/August timeframe would set up a decline in price into October – one that could be worse than many expect.

We reiterate that slower moves are more bullish – we like the trading.  Are the Shorts on the run? Not really as they are making money. But down the road there could be covering by the shorts.

Industrials is one of the strongest sectors, yet this is not widely acknowledged.  GLD has closed below the key 302 area. We have been looking for a break of this area to signal a drop in gold, so be careful if you are in GLD.

Tuesday was a strong day that gapped up and closed near the high of the day.  TLT had an outside day up that suggests further gains.

Before the US attacks, we had been looking for an up week, and the indicators still suggest this is likely.  We would expect to be down early in the week, and up at the end. We will have more in the Midweek and may issue an alert this week if conditions warrant this.

Our advice is to use this to pick up names you want to own if they are down and near strike prices.  The trend on GLD is still up unless it moves below 302 but watch this carefully.  TLT has rallied and should have more upside, per our forecast.

While we could be choppy in the first part of the week, we expect to resume the rally by the end of this week.  If there is more weakness, numbers that could be tested are SPY 586, and QQQ 514. If we see these ETFs trade down early in the week, we would buy at those points.

We want to show some charts of GLD and SLV, illustrating the dangers of an advance in SLV, and how this often ends bull markets in the Metals.  If SLV rallies into a peak and GLD starts to fall below 302, it could be time to sell.

We have been looking for a short-term pullback before the summer rally begins, but that may not occur.  The McClellan Oscillator indicator suggests further upside as well.  We are starting to see the kind of action in silver that often indicates a peak in the metals.

We do think that the down opens and up closes are positive.  If there is a strong move in SLV it would be an opportunity to sell GLD.

We are expecting another week of choppy, sideways to slightly down trading, and then a solid summer rally.  We continue to see bullish forecasts, and we too are bullish, but this scenario of a potential spike in long-term interest rates could cause some problems in the third quarter.