FREDAlert!
Volume 7, Issue 2
June 30, 2015
Monday’s stock market action, and the prospect for some more downside into the end of the day on Tuesday is welcome and in line with some of our forecasts for a decline into the end of June/July. Readers will recall we have been advocating carrying an above-average cash position, and investing client money more slowly especially for new accounts, as corrective behavior has been forecast by the narrowing technicals since the beginning of 2015.
We have been looking for a decline over the summer to increase the amounts of a dollar cost averaging strategy and would use this weakness to add ½ the money held back. Key levels on SPY remain 205 – 204, now being tested and which could hold, and then 198. These have not changed since mentioned in February. If this area breaks, then we will add a bit more cash at 198 assuming that is hit. We remain a bit cautious, as technical indicators have been suggesting a more difficult decline than what we have seen so far, although admittedly that has not occurred so far. And, as mentioned in the Weekly, this is a news event driven tape that we think will not amount to much in the long run. We show daily and weekly charts of SPY, below.
We note that early this morning futures have rebounded sharply as reports leak out that Greek Prime Minister Alexis Tsipras is on his way to Brussels to cut an eleventh hour deal. Indeed the news driven tape continues.
BUY IDEAS: In the Weekly, we recommended adding big banks to positions. We would use KBWB as a vehicle for this, and note that Monday’s decline has not taken it back to test the breakout. We would add this to models, and even KBWR if you wish. We show weekly charts of these as well, below. Stocks of interest include BAC, BK, and WFC, MS.
BONDS: We are seeing the countertrend rally in bonds we have been looking for. It is still weaker but we have some hope of seeing 22 – 20 on TNX. Even 22.50 would be a good sell point for bonds. We have been looking for 29 – 28 on TYX and these numbers have also moved up a bit. TYX at 29.80 would be a good sell point.