If the market is to be strong in 2016, we should see some indications that it is broadening out in early January. Most of the forecasts for the petroleum complex are negative, and this market is oversold enough to rally in January.
This week should be quite interesting, as our forecast for the next year depends a lot on whether we have an up close or down close for the year. For next year, any move on the Transports below 7000 would constitute a strong sell signal for the market as a whole. Accumulation models suggest we could see a rotation into XLB and XLI and out of XLY and IYW, and if we see this sort of action in conjunction with a market that broadens out in early 2016 it would be very positive.
Last Friday was options expiration, and we think the way the market traded had a bit to do with that. The market went below 202 on SPY – the short-term trend is now down unless SPY can make it above 211.
The Fred Report - Mid Week Update December 16, 2015We would like to see the dollar up into the FED announcement, and then a reversal. If the dollar continues to strengthen after the announcement, then it would be worse for the markets, in our view.The Fred Report - Weekly December 14, 2015We would like to see the market down and churning early in the week and then slightly up into Friday expiration. Should this pattern occur, we could still see a bit of a rally into year-end. A High Yield Bond Fund was suspending redemptions and this caused a sharp selloff in the ETFs associated with junk. Those advisors who want to buy oil in some form, should look at UGA as the strongest relative strength play.The Fred Report - Mid Week Update December 9, 2015We have been looking to add the last 1/3rd on a close above 211 and that has not occurred. Our concern here is that the commodity deflation is going to start to affect the markets and lead to more of a pullback.The Fred Report - Weekly December 7, 2015
The daily stochastic on all of the major indexes is in sell mode, suggesting there is no hurry to add to U.S. equities. Bullish sentiment on the dollar is in the high 60’s, not overbought but enough that a “surprise” decline is certainly possible.
SPY is attractive as long as above 202, even if oil stays below 42.50 as it is now. It now looks as if bonds are going to rally into the meeting and drop on the news.
The Fred Report - Weekly November 30, 2015Stocks are interesting into yearend, and we continue to expect performance chasing to dominate the trading. If we are to have a good year in 2016 we should see the market broaden out, and we will look for signs of positioning over the next month.The Fred Report - Mid Week Update November 25, 2015U.S. equities are behaving about as they do on Thanksgiving week, and if the pattern continues we should see a flat day Wednesday and an advance on Friday. Crude Oil has rallied back above 42.50 but not by much. The Fred Report - Weekly November 23, 2015
We note that Thanksgiving week is traditionally up at the end. We actually expect a narrow market into the second week of December but would like to see improvement until then, and then strong improvement after, as funds position for 2016.
We saw a relatively whippy day on Tuesday – and this could continue into Friday’s expiration. Now is the time to position into stocks that are near (within 10%) of their highs for a move into late December. We could move above and below key points several times – and closing at or above 205 on Friday would be quite strong.
“Is the rally from 190 over and should we hedge?” Our answer to this is so far, at least, no. We continue to feel that treasuries will continue to decline, up into the Federal Reserve (FED) meeting in December.
The Fred Report - Mid Week Update November 11, 2015We would love to see a down week. Gold may very well stage a sharp rally to at least 108 on GLD from this juncture.The Fred Report - Weekly November 9, 2015A down week would be a plus and set up rally into December, as long as SPY can remain above 205. TLT is starting to break down, and below 120 is a concern. Below 119, now being tested would tend to confirm that a move to 115 or below is underway.The Fred Report - Mid Week Update November 4, 2015Stocks have been frustrating as we have been looking for a close above 211 on SPY to add more money – of course it closed at that number. Our 223 target remains intact as long as 205 holds, and we will end up raising that number a bit after a move that closes above 211. A break of 120 – 119 on TLT targets 100 – 96. We have said XLF is a second half story and it could run into 2016, especially if TLT can break 119 as we expect.The Fred Report - Weekly November 2, 2015
As long as SPY can remain above 205 the S&P 500 can rally. Below this targets 201 and below that would be a concern. The monthly Fred’s Price Oscillator on oil is suggesting December should be a strong month for oil, maybe the strongest month since August, but the move may start later in the month. We believe the “elephant in the room” as far as stocks are concerned is the spectre of commodity deflation brought on by a slowing economy in China.
The Fred Report - Mid Week Update October 28, 2015Our biggest concern here is that oil has broken the support area we have been looking at for some time, and if the low of Tuesday’s close breaks, the commodity should hit new lows.
