We are overweight XLF, and XLV. These still have strong accumulation models. We are underweight XLE and IYZ, which hit downside targets for 2018 but remains an underperformer. XLP is a range. XLRE has strong accumulation models and broke out to the upside – we are an Equal Weight.
Our favorite broad-based Commodity Index ETF, DBC, has rallied into the first quarter of 2019. Targets are 18. Watch Oil via USO and DBC carefully. These could suggest a rally in the oil stocks. There are short-term bottoms in place on oil and DBC, but we are entering a period of seasonal weakness on oil – consolidation is possible.
SPY is rallying in the first part of 2019, per our yearly forecast, and indicators are short-term overbought. The rally has been very strong in terms of breadth, a plus, but weekly indicators are still in downtrends despite the breadth surge readings on the daily indicators.
The market resolved the oversold conditions on this rally. As of now, we are prepared for another decline that should complete a bottoming formation – but advisors have some good investments at attractive prices.
The drop was more extensive than expected, although our target of 240 held. The market is oversold to rally but the quality of this is important. As of now, we would look for another decline that should complete a bottoming formation.
SPY has rallied to the 290 area, and the divergences led to a sharp drop as forecast. Now, if there is strong breadth for the next few weeks the market could be setting up for a strong beginning to 2019. Otherwise, another drop at the beginning to 2019 is possible.
New Highs/New Lows has rolled over again, and is now negative: It fell off as the market corrected in February, after beginning to weaken before the correction started. Remember that this is a leading indicator that often goes negative first. Now, there has been four weeks of more new lows than highs, suggesting a corrective period could occur.
SPY has rallied to the 290 area, and there are divergences. The market is still set up for a fall correction. The danger is this new high is reversed. Note that RSP has not made new highs (we talk about indexing in the research piece), a sign the market is narrowing. Breadth indicators suggest this as well. For an example of how a false breakout could look, check out the weekly chart of XLP.
Commodities have built a long-term base, and these could be strong in 2018. GLD is consolidating and it is back in our models as a buy. It could test the133 level. Industrial metals (DBB) have pulled back, but from high levels. Oil seasonal weakness may be over – the seasonal bottom is the May/June time period, but it has hit our targets and could consolidate.
Oil seasonal weakness may be over – the seasonal bottom is the May/June time period. Our favorite broad-based Commodity Index ETF, DBC, is at 17.50, our first target, along with oil. Targets are 22 if this can stay above 17.50. Watch oil and DBC carefully –Oil has signs of a seasonal bottom, and it is May/June when this occurs.
The Put/Call indicator is now very positive as it is in areas marking major bottoms. We rate sentiment neutral here because the intermediate sentiment indicator remains in sell mode, although Put/Call has given strong buy indications.
Equities should be a bit choppier due to overbought conditions, however. Breadth indicators have also started to improve, and are not overbought. Equities are set up to rally, and while a short-term pullback is possible that would set up a strong 2018.
Commodities have built a long-term base, and these could be strong in 2018. GLD has surged. We sold it, but it may have bottomed at 117, our forecast price. Industrial metals (DBB) have broken out. Oil seasonal weakness into June has produced a rally, but favorable seasonality ends in February.
SPY and other indexes have broken out. The IYT has confirmed a bull market according to Dow Theory. This should be enough to set up the strong end to 2017 we have forecast. Breadth indicators have also started to improve, and are not overbought. Equities are set up to rally, and while a short-term pullback is possible that would set up a strong end to 2017.
Our current reading of the internal momentum indicators is POSITIVE. The intermediate FBO has a divergence in place but may be a rounding bottom, and is improving. The daily FBO has given a breadth surge. A rally should improve the breadth indicators. We are hopeful as normally the McClellan is the first indicator to improve – and this pattern is starting at this time, and this improvement affects the other indicators. This is happening now.