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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.
Up opens and down closes are hallmarks of a downtrend. For bottoming signs, we would like to see stocks take out the Tuesday lows, and then snap back.
We have no changes to our basic market outlook, which is more corrective behavior. We expect more upside on bonds, but that this move will be retraced completely when the equity correction is over.
The technical condition remains such that when the overbought is resolved, stocks look positive. Homebuilder ETFs suggest a strong economy into the election.
Daily, weekly and monthly stochastics are major equity indexes are overbought. We could see another pullback.
Understand we are NOT intermediate term bearish and would view such a decline as a buying opportunity. We have been underweight this sector for over a year and keep looking at it with a view toward changing our rating but the signals never materialize.
We could see some choppiness into the end of February or even March. However, we would add money to models slowly through that time, as this is no means assured. As far as bonds go, they are beginning to fail at our projected resistance, and the same with gold. GLD may be the riskiest here because our accumulation models suggest a quick drop.
SPY is declining about as we have expected, and the 320-area is being tested as we speak. Ideal would be a small bounce and then a test of the 315-area we have mentioned, but that could also be tested right away.As stocks pull back, TLT has rallied to the top end of the range, but there is glaring non-confirmation from the accumulation model, which suggests this move could be retraced.
The first consideration is to reiterate that, aside from overbought trading indicators, the technical picture of the market is fine. The other thing to remember is that in a bull market pullback not all stocks and ETFs decline with the market. Examples here already include SPLV and AAPL.
Accumulation models on GLD, as we have written elsewhere, do not preclude owning gold at this time, but do suggest that a rally could be quickly retraced.
There continue to be signs of a sharp pullback in stocks, and we have suggested this could occur in February. This would result from overbought conditions and not any sort of fundamental condition, in our view. Two areas we think could be strong in 2020 are Transports and Financials.
Stocks have continued to rally this week, with SPY up 0.56%, and we have no change in our market opinion as elucidated in the Weekly Review. IIPR remains our favorite Marijuana stock for conservative investors, and CRBP is our favorite for speculators.
The daily stochastics need to recycle, and this could occur more in time than price. With sentiment indicators where they are, and some of our volatility indicators suggesting a sharp decline is possible, we lean toward a more volatile move. We would use rallies in LQD and TLT to sell, and switch to dividend payers or preferred stock ETFs, which should do better in 2020.
This could be a big surprise in 2020 – as far as I can see I am the only analyst suggesting Transports could be a big trade in 2020.
Note that we still expect stocks to pull back in February and not now, although this surprise may be the fundamental development we needed to recycle daily and possibly weekly stochastics. In terms of WTI prices, 63 to 67 is resistance and if that is exceeded a test of our target of 72/bbl is likely in the first part of the year, rather than the second part of 2020 as we originally thought.
Our indicators are overbought but do forecast such a correction. If it happens, then it will likely be later in January or in February.
We have no changes in our market outlook into yearend – things are overextended but not negative, and while the market may be choppy Monday, we would expect Tuesday to be up. UUP should pull back to 25.50 to 25, and if that area holds it will remain in an uptrend. Below that would suggest lower prices.
One consensus that is coming out in various firm’s research is that Emerging Markets is going to be the big leader in 2020. From a technical perspective this is possible but unlikely. We would expect EM to under perform the US, even if it rallies next year.
We would continue to add “value” stocks and funds to accounts, but slowly. Value is continuing to improve but does not yet have enough to suggest it is going to assume the lead in 2020. As long as DBB can hold the support in the14-area, it should challenge resistance in the 16 to 17-area, and then make new highs.
U.S. stocks are digesting last week’s gain and should advance more toward the end of this week.
U.S. stocks have acted about as we are expecting going into yearend. We expect further advance. We do want to point out that IJR has made new trading highs above 82, and advisors can start to add more Small Cap ETFs to models. We have been asked a couple of questions about MLP’S, and one of these is germane for the end of the year. These are oversold and likely to bounce in early 2020 in a “January Effect” type of move.
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