Weekly Report

The second half of 2026 should be up, but we believe there should be rotation, and broadening out of the market. If we don’t see this, there could be problems.

We again suggest a larger commitment to Small Cap. Metals could be vulnerable, so watch this carefully over the next few days.

We still see the chance for more correction into the end of June, which would get the daily stochastics down for full recycles. Currently, daily stochastics are turning up in advance of a recycle, a high-risk buy pattern. Recall that our Accumulation Models have been suggesting a major advance in small cap is likely and it looks as if this is starting.

Daily stochastics are down but not yet oversold for SPYand QQQ, and it is likely that these have stochastic buy recycles before this pullback is over. We note that IJR and other small cap indexes continue to trade better than the popular averages, again suggesting this area could be leadership in the second half. This area is a place to add a position in GDX.

Market Vane Bulls is the second highest reading we have had since 1993. This supports our view that the recent action in semiconductor stocks, while speculative and unhealthy, is not a sign of an imminent market peak, and therefore a stronger than average second half of the year is likely. GLD could build a quick base here, with a slight decline in SLV, before the next advance above 400.

Stocks are trading ok but overextended on the main indexes. We have two forecasts for interest rates. The first is a short to intermediate-term forecast that rates will pull back to the bottom end of the consolidation. The second is that ultimately these will break out and move higher.

The idea here is that we are not seeing a rally in Growth, but rather in Tech. FBO Weekly Breadth Indicator suggests the rally is on thinner ice than most market participants see. We are expecting a big drop in oil soon. The question is whether it starts in June.

We continue see signs of excessive optimism. We are not sellers here, just deferring buying. What do FXI and KWEB charts say about the Chinese economy? We actually think the message is bullish longer-term, as stocks like Chinese financials and industrials are doing well.

We still expect choppy to down into the end of May or so and we will deploy the rest of our cash. The dollar is NOT weakening, and in fact is quite strong on an intermediate to long-term basis.

Stocks fell on Friday and although the decline was not severe in terms of percentages, the behavior of the fixed income markets has caused some fear in the press. We continue to look for some pullback into the end of May.