We continue to advocate holding to firm weightings to small and mid cap, but would become progressively more cautious on mid and small cap should MDY move below 230, and should IJR move below 98, in a correction. Bonds have digested some of the short-term overbought readings, and while they should consolidate a bit, and TLT could test 104, this market seems poised to rally again in March if not before. Gold has broken out of the Head and Shoulders bottom on the daily charts, and this move has been confirmed by silver.
Stocks have rallied into the main resistance area of 182 – 184 on SPY, and could make a new high in February. We continue to recommend smaller allocations to small and mid-cap names.
We remain long-term bullish although we could see the much more volatility this year than last. We would continue to use this rally to sell all bonds and bond instruments advisors wish they had sold before the tapering announcements.
Advisors can add about a quarter of cash built up now that momentum indicators are less overextended. We have adjusted stock portfolios slightly to take advantage of a projected advance in February. TLT has closed over the key 108 area, and should continue this rally to the next critical area, which is 110.
Stocks have traded well so far this week, challenging the important support at 177.30 and then closing above it. We continue to have objectives at 203 on SPY and while it would be better for the technical condition of the market to have that target hit later in 2014, we would continue to dollar cost average new money.
The Fred Report - Weekly January 27, 2014The key number on SPY is 177.32, the lows of last month. If this is violated, more downside could be expected. Per the seasonal trading rules we use, we will remove USO from our bucket list Friday January 31st. EEM has support in layers at 36 – 33 and given surprising weakness in accumulation models at the end of last week the lower ends of this could be tested.The Fred Report - Mid Week Update January 23, 2014
We still think AA can trade to 14 – 16 but because of the strong out performance we would rate it a hold and would not add to positions at these levels. While we think this could be a bottom for Gold stocks, we still believe the actual metal will outperform first.
The monthly indicators on bonds continue to suggest a stronger first half of the year for bonds, and TLT has started to react better to this forecast. Real Estate ETFs could perform much better than expected if bonds stabilize or rally in the first part of 2014. While we remain an equal weight for the purpose of our sector portfolios, for income investors it may very well be time to start adding Utility stocks and ETFs to portfolios.
We do not see anything to indicate that Tech is faltering in spite of some underperformance by AAPL once again. The main thing is that rallies in FXY are likely to cause dips in the Japanese equity ETFs and we would use them to add to positions.
The Fred Report - Weekly January 13, 2014It is options expiration and we are expecting a bit more volatility this week. We think that EEM can have a great year, but ONLY if 45 is exceeded – otherwise, it remains in a base.The Fred Report - Mid Week Update January 8, 2014Stocks are trading quietly here at the beginning of the year. We would use any rallies in FXY to add to Japanese stocks, which should perform well this year.The Fred Report - Weekly January 6, 2014On balance, we see January as being down, which is slightly out of consensus but would be positive. We maintain a Neutral/Defensive stance in portfolios. GLD is rallying off of a double bottom from the June lows as well as a short-term double bottom.The Fred Report - Weekly December 30, 2013Rates could rise a bit more than consensus forecasts. One surprise that may occur in 2014 is resurgence in business spending, and improvement in that spending vs. consumer spending. Put/Call has made new lows vs. 2011 and suggests that short-term sentiment is also becoming extreme. This could create a whipsaw scenario at the beginning of 2014.The Fred Report - Weekly December 23, 2013Growth looks better on a technical basis than does value for at least the first part of 2014. The most interesting development we have seen is that copper and gold are starting to move in different directions.The Fred Report - Mid Week Update December 18, 2013
Markets are overbought enough to see some more correction, and this would not surprise but a Santa Claus rally is set up. Kol is trading weaker than oil, which suggests that oil will probably decline after the favorable seasonal period is over.
Stocks have pulled back and may have set up a Santa Clause rally due to last week’s negative close. We think emerging markets are going to do better in 2014, but until the 45-area resistance for EEM is decisively penetrated on the upside would not take big positions.
We continue to see signs of an emerging growth over value trend. Gold continues to show bottoming signs. The oil and gas winter trade is progressing.
The Fred Report - Weekly December 9, 2013We continue to be overweight and interested in XLI (Industrials) as opposed to the consumer sector ETFs (XLY and XLP). A smaller correction should happen sooner rather than later – and should the market defer this smaller correction it is setting up for larger risk in 2014. India and China continue to improve, suggesting EEM will ultimately resolve this consolidation in upside behavior.The Fred Report - Mid Week Update December 4, 2013Markets are acting about as this week was forecast. UNG seasonal trade is to hold until January 31, and we will leave in our Bucket List for now – but this has hit our target of 19.45 and traders can take gains. USO looks as if the seasonal trade is starting to work and if above 36 our end of January target of 38 is within reach.
