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In our view, these are snap back rallies in stocks like PLTR and should end this week, then resume some downtrends next week. TLT has started to rally. We continue to look for some more upside, say to 90, where we would reevaluate this unit. GLD and SLV were up Monday but down Tuesday. There should be more upside here, but if these continue to pull back this week, there could be downside without an intervening rally.
Weekly Advance/Decline numbers on the New York were positive, while the NASDAQ saw negative breadth. The rotation is real.
New lows for GLD below 427 would suggest continuation of the decline. We are expecting more bounce/basing in the metals but remain negative, especially on SLV.
Right now, we are going with two assumptions: (1) that we are going to be right about a pullback into the April to June time frame, and (2) that Transports and Small Cap will outperform on a decline. We all know Tech is the largest sector in the S&P 500, and it is over owned by retail investors. This could make it more vulnerable.
We have advocated selling off some unwanted positions and taking some profits, preparing for an expected pullback into the April through June timeframe. We figured metals could advance into the end of the month and expect GLD and SLV to have a difficult time in February.
SPY should hold 675 and QQQ 616. Below those numbers would be an indication that some corrective behavior has started. Fred’s Price Oscillators for Crude Oil and Gasoline are down without a buy pattern. This suggests a pullback now and a summer rally, a normal seasonal pattern.
While the leading stocks in IYW and XLK are still strong, we are seeing more weakness in secondary tech. We should be moving into other areas, such as XLI, as an example. Having some representation of other indexes in portfolios is also important – and we have discussed switching into RSP as opposed to SPY.
We still look for a rally into the end of January after a choppy week. TLT is starting to perk up as well, as long as it can stay above 87.50.
We note that RSP and Small Cap ETFs continue to look stronger than IYW (Technology), which we view as a plus suggesting leadership change. We still maintain our forecast for an intermediate peak near the end of January with a solid tradable low in May.
We have moved above 692 today, faster than we thought! Ideally, we will close above 692 in the next few days/week to absolutely confirm our view. We have been asked what bond ETF to buy for a trade into the summer. Our favorite here is MUB. QTUM is breaking out of a consolidation and as long as it holds 107 it is strong enough to buy.