Much below 198 – 197 on SPY implies more corrective action and while we believe there is more risk in Q2 we could easily see a breakdown now – bounces are getting weaker and indicators worse. January will be the lowest Monthly close for a month or two on crude oil, thus providing a short-term trading opportunity in oil stocks.
The SPY has held support at the 202 area on a closing basis. There remains intermediate support at 198 or so. We would use weakness to the 32 area to buy positions in XHB.
The Fred Report - Weekly January 26, 2015An attack on the highs next week, combined a higher January closing high relative to December 2014 would be a strong indication that any corrective behavior will in fact be shunted off until the second quarter. Advisors looking at putting money into oil and take advantage of our forecast that this month is going to be the low closing month should likely wait until the end of the week to do this.The Fred Report - Weekly January 20, 2015In spite of the weak market so far in January, we still believe that a rally from this area sparked by a rally in oil should occur, and then the market would be at strong risk for a real correction in the second quarter.The Fred Report - Mid Week Update January 14, 2015
We are continuing to hold the 202 area on SPY, and we have tested it repeatedly. IJR is performing a bit better than the larger cap names – something we have been looking for to reflect some positives in the economy.
The Fred Report - Weekly January 12, 2015We continue to recommend low volatility (SPLV), and discuss the possibility for a rally this week. We are looking for more volatility this year and think it will be a year for option writing – which generally means higher option premiums and a higher VIX.The Fred Report - Mid Week Update January 7, 2015We were looking for a choppy beginning to 2015 but this has been more of a straight-line move. Below SPY 197 closing basis would suggest problems sooner than we anticipated.The Fred Report - Weekly January 5, 2015
Our favorite sector for the 2015 remains XLF, the financials. One part of the market that is oversold and has potential is the commodities area, and of the popular commodities gold is very interesting here.
The Fred Report - Weekly December 29, 2014We are overweight financials in our sector models and are emphasizing big banks rather than small regional bank names, which we believe are over owned. We would buy emerging market (EM) related ETFs in this area but slowly, looking for a test of 42 on EEM and then another pullback. We would treat this as an accumulation chart for longer-term investors and a good trading chart for those so inclined.The Fred Report - Weekly December 22, 2014Given the performance of New Highs/New lows there are some reasons to be cautious as 2014 draws to a close. It is a bit too soon to say energy has turned the corner, but it has entered the turn and so far it has remained on the road.The Fred Report - Mid Week Update December 17, 2014Another close below 200 moves risk on SPY to 194 – 193 by yearend. There were several more bottoming signs today on USO, but it is not a confirmed bottom unless it moves above 60, and then we still look for a retest.The Fred Report - Weekly December 15, 2014
The bottom line is that we should trade above 205 on SPY, say to 206 this week, and we would eliminate call positions on that move. We have to watch to see if U.S. growth slows as worldwide growth slows. we would view a move above $60/Bbl on oil as confirmation that the first bottom of the pattern has been made.
The Fred Report - Mid Week Update December 10, 2014Small Cap stocks are improving verses Large Cap stocks. The dollar is actually weaker than many believe as the biggest component – FXE – is still in its trading range. Oil is giving indications of a divergence bottom. This means that even if oil has a rally here it is likely to retest or slightly to exceed the first good low.The Fred Report - Weekly December 8, 2014
The end of this year could be interesting as IJR is giving buy signals such that it could outperform on a relative basis. Another area that may be showing cracks is Technology. DBA is a longer-term trade that should be up a bit in December, but really will show some positive movement in late winter/early spring.
The Fred Report - Mid Week Update December 3, 2014The market is thinner and a bit more caution but not outright bearishness seems correct to us. There is no outlook change for us in the oil stocks, i.e. a weak equal weight with XLE and Integrated Oils looking better than OIH and services.The Fred Report - Weekly December 1, 2014Stocks are interesting as the NASDAQ Composite made a new monthly closing high vs. the 2000 peak. As long as SPY stays above 201 the market is attractive short-term but that 201 – 203 area could be tested.The Fred Report - Weekly November 24, 2014
Stocks have likely started a Thanksgiving rally, and it has the appearance of broadening out, but once again we had a negative weekly advance decline line. TLT is trading in a desultory way, and we remain with our view that bonds have peaked, and rates have bottomed, for a while.
One of our favorite sectors, Healthcare, is trading well and should continue to lead. For MOO, above 58 targets 65 and this should test 57 – 58 even if it fails to break out.
The Fred Report - Weekly November 17, 2014Stocks have hit our main target of 203 on SPY for 2014, but our timing models are already in defensive mode so we are in no rush to make changes to models. Agriculture looks buyable and may be a good seasonal trade. USO had an inside week, often a suggestion of a trend change.
