We saw some key reversals on GLD (SPDR Gold Trust) and SLV (iShares® Silver Trust) - in particular SLV - last week. We have had, and continue to have, concerns that our accumulation models have suggested a sharp drop in the metals, and that prices were not sustainable in the 140 area.
A tradable bottom is close at hand. We would hold DBC for now. It looks like some rally should occur. While Oil has negative seasonality at this time, the indicators have already come down, indicating some rally is possible from here, even if there is further decline later in the year.
Advisors have added some money per our instructions, and the question is obviously if this is the ultimate low of this correction? It certainly could be but the most important thing to us is that the risk now looks to be no more than 276 to 277.
It is probably a bit too early to suggest we are out of the woods, but at the same time advisors with new money or new clients can start to put people into their models. TLT has performed better than we thought it would on this move, but now it is in a position where the accumulation model does not support prices, and it is overbought.
While the behavior of small and mid remains a concern, there are enough positive indicators such as the advance decline line (at new highs!), and improvement in some of our weekly proprietary breadth measures that suggests the market actually looks reasonably attractive, within this summer doldrums period. If above 98, the dollar could test the highs of 2017 in the 105-area. This could become interesting for other markets, probably hurt stocks.
If we were going to short SPY, we would do a light position, try to get 302 or so, in front of the FED meeting or press conference on July 31st. We are seeing some signs of improvement in XLB and want to call this to subscribers’ attention.
TLT is down, and close to a daily recycle. Assuming that occurs, failure to make a new high on that signal would suggest bonds are peaking. Accumulation models do not support higher prices on GLD. Unless below 25.80, we are bullish on UUP.
While the $NYA chart still has not made new highs, much of the justification for Jeff Gundlach bearish position based on this index is gone, in our view. Until DB tests 10, it is still a downtrend and new price lows would suggest the restructuring will not work.
So far, it looks as if our summer rally scenario is under way. Part of that forecast is a tradable peak in late July, early August and while nothing is set in stone, I am starting to see some developments that could point to problems toward month end.
This is a short holiday week, so there will be no midweek, chart book or call unless something whacky happens with the markets. General advice here is to take some profits on bond positions and move that money into REITs or Preferreds.