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Below are Fred's Weekly Reports with a brief synopsis of each. To view the full report, click on the title.
The patterns on some of the longer-term breadth indicators a]lso suggest caution is indicated here and now, but that the market should be higher in the second half of 2019.
TLT is holding on and has basically supported at 118.50. As long as this area holds the trend is still sideways to up, and it could challenge 125. We still think Britain will be better off out of the EU.
U.S. stocks are testing some short-term support areas that could hold, and advisors with “too much” cash should add some here. A break of 272.40 on SPY, followed by a break of 271 would indicate further correction.
Other than small cap there is just not that much to talk about here. EWS is interesting, has a strong yield, and may be a good way to trade an advance in China.
SPY has slowed in the area around 280 and we have seen some new low expansion, one of the factors we are looking for to suggest this rally is ending. We are seeing some signs that interest rates should rally over the next few months, and bond prices decline.
We are comfortable being overweight XLV in our Large Cap Sector portfolio.
Stocks closed the week reasonably well, and there was no new low expansion, which is our “canary in the coal mine."
Stocks were up for options expiration last week, and new lows did not expand, suggesting this rally may have a bit more to run although indicators are overbought. PSCE may be a cutout low, and for speculators this is a good opportunity.
We note that the weekly stochastic is now overbought, above 80 and if it turns down, we will have both daily and weekly stochastics negative. Should this occur we would consider starting to move back into low volatility from our equally weighted RSP position. We will be watching the new lows numbers – if they start to expand, we would have concerns.
Transportation charts support the possibility of pullback and retest over the next few months. When we look at these European ETFs, they suggest that we should have European concerns. The real question is whether European growth and financial concerns will cause a drop in the Euro and a spike in the dollar.
The next daily stochastic signal, which will occur on a rollover and move below 80, should lead to a buy recycle, and we would wait to deploy significant new capital until that occurs.
Stocks rallied last week and are up at the top end of our resistance band.
The daily stochastic on SPY and QQQ have both gone into sell mode, suggesting momentum weakness Our tax loss list has been completed. Five stocks hit their trading targets, one Century Link (CTL) was stopped at breakeven.
We still believe the odds are we will have a retest but it may come later in the year, after more short-term topping action. While this area for REITs still is in a trading range, there are some signs in my accumulation models that suggest this year they could break out of this range and stage an advance.
Several indicators are now suggesting the market should pull back into the middle of next week, or possibly longer. The daily stochastic for GLD has gone negative, and the weekly is overbought and starting to turn down. GLD hit the resistance at 122 and gapped down from that area Friday.
This week is options expiration for January so we may see some consolidation and choppiness in stocks into the end of the week.
On the upside, targets on SPY are 260, then 267 to sell, and on the downside, exceeding last week’s low would do it for me – and that number will go up over the next few weeks. From the standpoint of risk management this is a good situation and we would buy MLPs at this time.
The risk here is a retest or even lower lows after this rally runs its course. We have been looking for 255 to 260, but this could stretch to 267.
The market should have more upside here, but cautious advisors should realize that a good pullback is likely after this rally runs its course. This move should take a few months to materialize, but ultimately, we should see UUP at 24.50 to 24.30.
A rally is possible that could carry SPY to 255 – 260 or so, but that caution is still warranted intermediate term. We publish our Tax Bounce list today.
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