Weekly Report

Stocks are still trading a bit stronger than we hoped for coming into the end of June, but at least (so far!) we are down for the month on the S&P 500 and the NASDAQ 100. As long as TLT can stay above 85 interest rates have probably peaked for the year. There is some short-term resistance in the 102-area on the Dollar, but this should break and send the Dollar to 110, our next intermediate-term target, by the end of 2026.

We have had some sporadic sharp drops, the market has been stronger than anticipated. From a fundamental perspective this must mean the economy is stronger than most pundits believe. We would avoid the long side of GLD and SLV until we actually get a buy signal.

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.