Below are Fred's Weekly Reports with a brief synopsis of each. To view the full report, click on the title.
The market should be choppy to up into the end of May/early June or longer. TLT is still trading in the 90-area resistance and next resistance is 92 or so. Failure at that level could end this stock rally early, so watch TLT.
Stocks still look bullish into June at least. This view will hold unless SPY starts closing back below 511. We think this downtrend in FXY may finally be ending (or at least slowing) because of the recent trading action – the new low followed by the pop up with no follow through buying is typical of a first round of government intervention.
In Stocks we have seen the expected move above the 512-area in SPY. We would continue to add to Mid Cap names in here as this area looks to continue to improve.
If we are correct, this market should stage a choppy rally into the end of May, before the next pullback. The weekly stochastic is close to a buy recycle, and failure to exceed 100 on this signal, if it occurs, would be a signal rates should trend higher on the next sell indication. We rate China as buyable here for the first time in several years.
The market pulled back Tuesday, surprising us as we did not hit our first trading sell point at 512 on SPY.
Stocks still look they have made a trading bottom at least, and possibly an intermediate bottom. The McClellan Oscillator is now neutral, at a +1. This suggests more upside. This is one of the reasons we are short-term bullish.
It looks as if the short-term bottom we have been looking for has arrived. We will watch SPY at the 510 to 513 area.
Stocks have been in pullback mode, and we have challenged the areas on SPY and QQQ we have been looking for. These were the 500-area on SPY, and the 425 to 410 area on QQQ. Note that Mid and Small Cap were up on Friday, and advisors that are more aggressive might want to look at this area instead of the large cap units.
SPY has come very close to the 500-area we have been looking for. QQQ has fallen off as well and is testing support in the 430-area. We think the market could turn up for the remainder of the week but remains in a precarious situation due to the bond market – which could be choppy to down (rates up) into the end of the month.
Stocks have continued the pullback we have been looking for, closing below the 512-area on SPY that has supported this market. This targets the 500-area we discussed as our secondary support. This pullback is probably not over, and after this week the decline might resume.
Everybody should reread the Weekly regarding a potential upsurge in inflation and watch oil with regard to this. One of the sectors that is trading well, and related to commodities, is XLB.
The only concern we have is that the daily stochastics are only about halfway down the range, even on the weakest indexes. This suggests there could be some sideways action or even further decline to secondary support. Interest rates do look ready to advance.
A break of 512 on SPY would target 500. QQQ has tested the 439 support we have been looking for and much below Tuesday’s low at 438.03 would target 432, then 400. A TLT close below 91.42, would suggest a sharp rise in rates is likely ahead.
We continue to see that the stock market is broadening out, as RSP has made new highs, along with MidCap. If TLT becomes overbought, without price exceeding the last high, and ideally testing the 100-area, the chance of a rate cut drop, in our view.
We would be careful of the next sell recycle in QQQ and IJR – these could affect the whole market. We are holding positions, but mindful of benchmarks. We have mentioned using Canada as part of an international allocation, and that still seems to be a good idea. EWA is weak, reflecting the weaker Chinese market, and we would not use it.
Daily stochastics are still in sell mode and this remains a concern for us. If we were to add to positions, it would be in these two indexes (QQQ and IJR).
The advance is not over even if there is more correction, as we expect. The McClellan is a shorter-term indicator, and it suggests some more downside here.
Readers know that we have been emphasizing Healthcare and Industrials as favorite sectors and both are breakouts. There are several sectors that are improving – look at XLF. We want to start adding to Mid-Caps and have some ideas that look strong. We will look at XMMO and XMHQ.
We will be watching IWM, as this has been trying to give us our closes above 207 for the last several sessions.
We would like to see this continue to at least 480 to 500 on SPY, and to 430 to 425 on QQQ. TLT is rallying as stocks pull back. Resistance here is from 97 to 100. It is very possible that when TLT hits 97, the correction in stocks will be over.