The best action for stocks, given the overbought market would be a sideways to churning week that starts to correct the overbought stochastics and breadth oscillators without giving up substantial price advance. We would like to see continued industry rotation, out of last year’s leaders and into cyclical and late cycle names.
The Fred Report - Mid Week Update March 2, 2016Traders who have been playing this rally should move to a defensive position as of the open, especially if there is an up open. High Beta is still below breakdown point in early January, while SPHD is making new highs. This is why we continue to recommend (a) a defensive stance, and (b) to sell TLT and buy SPHD.The Fred Report - Weekly February 29, 2016
The risk is that this week could mark a peak in stocks for a retest of the recent lows at least. The bright spot in the commodities is the metals. GLD is trading near resistance at 120 and is a strong chart, again with the possibility of backing and filling. Penetration of this area targets 133 or so.
Stocks have rallied into first resistance, and really conservative players who want to hedge should start that process now. We finally recommend starting to buy MLPs for the first time since 2014.
We expect a rally off of the lows, based on the strong possibility of a rally in commodities, but that this will likely not turn trend following systems positive. TLT is vulnerable to a sharp reversal, and the reason we suggested sale was to exit on an advance in TLT rather than a decline.
The Fred Report - Mid Week Update February 10, 2016We think it is still possible that 196 – 198 could be hit. A rally that fails at 192 – 194 should lead to an immediate drop toward 175 or so. GLD has had an inside day at the 114 – area, which is indicative of a short-term top. Traders should sell any break of 113 with a view towards adding back around 109 – 108.The Fred Report - Weekly February 8, 2016From a technical standpoint, there is still a chance that the market can rally this coming week, but last week’s action lowers the chances this will occur. Best for the bulls would be a down open on SPY Monday, which we are now getting with S&P futures lower by -20, followed by a slow advance through the week – more base building than anything else, really.The Fred Report - Mid Week Update February 3, 2016The decline has been a bit more pronounced than expected. If this market is to rally from here and have a decent close to the week, we should test the 188.70 area or slightly below, and early on Wednesday – but ultimately hold that area and rally. Otherwise, the rally may have failed at 195 and turn into a test of the 175 area on SPY.The Fred Report - Weekly February 1, 2016
We have been asked if the market is broadening out and the answer to that is a qualified “maybe”! Overall, the action is heartening for the bulls – but it does not suggest this corrective behavior is over.
The Fred Report - Mid Week Update January 27, 2016Daily stochastics on SPY have moved off the lows to the high 40s. We would like to see the SPY close the week above 192 or above, and the setup is now here. We continue to believe that gold can advance and test the 112 – 115 area. If stocks rally, then TLT may drop sharply. The Fred Report - Weekly January 25, 2016
SPY has a minimum target of 192, and assuming it can get through this area a test of 196 – 200 is possible. The important thing to realize is that failure at the lower levels implies a longer and deeper correction. We believe a lot of money went into Bonds as a place to hide rather than long-term investing money, and this could crate volatility in this market over the next few months.
Stocks are oversold enough to bounce, and are near support – but if current support breaks there are grave concerns. There are couple of key numbers on SPX to watch The first is a close below 1867 on SPX – that is the number institutions are watching, and we have already traded below there, but held on a closing basis. We are more concerned with a close below 1840.
The Fred Report - Mid Week Update January 13, 2016We want to see better percentage gains in Transports, RSP, IWM – anything not large cap dependent. We would be concerned on any move below the low set on SPY, use that area as a stop.The Fred Report - Weekly January 11, 2016In our monthly review we indicated it was “put up or shut up” time for equities, and after a down first week we should see the market rally, and broaden out. Targets for a rally on SPY are 201.50 then 205, and 211 and traders who are in this market should raise stops to breakeven if 201.50 is hit.The Fred Report - Mid Week Update January 6, 2016
IJR has been outperforming MDY over the last two months. We expect the first five trading days of January to be negative as well, and then an advance is possible. We expect GLD to advance through the end of January and would like to see oil at least stabilize.
If the market is to be strong in 2016, we should see some indications that it is broadening out in early January. Most of the forecasts for the petroleum complex are negative, and this market is oversold enough to rally in January.
This week should be quite interesting, as our forecast for the next year depends a lot on whether we have an up close or down close for the year. For next year, any move on the Transports below 7000 would constitute a strong sell signal for the market as a whole. Accumulation models suggest we could see a rotation into XLB and XLI and out of XLY and IYW, and if we see this sort of action in conjunction with a market that broadens out in early 2016 it would be very positive.
