Recent Articles in Weekly Report

We also hope the market can start to broaden out – if it does we should have a strong finish to 2015.  We are overbought and how the market can handle this condition will tell us a lot.  Oil and XLE have rallied over the course of the last month. This rally is likely over and traders should sell positions. Investors should note that while the easy money is over, there is still the possibility of advance, and we would hold this area as an equal weight.

If SPY trades well, we should go no lower than 195 and correct the overbought in more of a sideways consolidation. A break of this area would signal a move back to at least 190 – 188 and very likely lower.  Until SPY moves above 204 to 205 the market trend remains down at worst, to sideways at best.

For us this means that the downside gap at 195 on SPY should fill, but no more.  Rallies should be contained by 204 to 205 on SPY if indeed this trading rally has not, at least temporarily, run its course.  We have seen many articles on the possibility of continued advance in the dollar, and this may occur in 2016, but we are sticking with our forecast that the dollar peaked in the first half of 2015.  Should FXF move above 102 it should challenge 108, where we would contemplate sale.

For those traders who are risk adverse but have not sold, we would sell on an up open.  We again caution advisors that we may see a leadership change in the next bullish phase, and that there is a lot of money trapped in Biotech, Healthcare, and Technology.

We should see a rally back toward 198 to 200 on SPY this week, but the internals suggest this could and should fail, setting up the retest of the low we have been looking for.  We have had a lot of questions about Emerging markets, and the bottom line is we still are not comfortable taking a position here.

Stocks are acting about as expected this week, choppy and up and down.  Bonds are acting as expected for sure – TYX is rallying as is TNX.  While we are not averse to putting some money to work we would be careful about buying in a big way this week.

The bottom line is that the internals have not improved enough to flash an all clear and cautious market participants should still add money to preferred issues and sectors slowly, if at all.  What I, (and FRED report clients) care much more about is how the bond market is going to react after the FED meeting.

Weekly momentum indicators are oversold enough to have an up week although the patterns on these indicators aren’t great.  Oil and the oil stocks should bounce around a bit – up and down like the market but this is an attractive-looking trading opportunity.

There are more sell signals than buy indications, normal but a concern suggesting this market could be choppy to down for longer than many believe.  Starting down towards 182 now would suggest that the first low of this move has NOT been made.

There is enough evidence suggesting another move down that cautious advisors should be selective in here and make sure to leave some money out for a retest. A pullback in Oil that reloads the daily stochastic, without making new lows, would be a welcome here. We feel that Europe has two things going for it at this juncture: it is safer and there may be more upside potential.

Indicators suggest things can get worse unless this 198 level holds on a closing basis, today.  Muni Bond ETFs are trading well and might be a good hedge in this environment.  We want to end up with PGJ at the end of this Chinese turmoil as that is the most attractive technical pattern of these units.

Stocks are little changed from last week, as are our views, but there has been some improvement beneath the surface.  Bonds look poised to resume their decline in price (and corresponding rise in rates).