Market Outlook for Stocks, Bonds, Gold and USD

Tue, Jan 14, 2014 - 3:12pm

The market rallied hard, and almost all of yesterday's losses were recovered. Positive numbers for December retail sales are given credit for today's energetic advance, but it probably has more to do with shorts being squeezed. This market has been brutal to the shorts.

Stocks: Based upon a 9/18/2013 Thrust/Trend Model buy signal, our current intermediate-term market posture for the S&P 500 is bullish. The Trend Model, which informs our long-term outlook, is on a buy signal as of 9/9/2013, so our long-term posture is bullish.

Yesterday, I said I expected a one-day bounce, but I didn't expect it to be this big. If price can get above the upper trendline formed by the series of short-term declining tops (see thumbnail chart), we'll have to assume that new, all-time highs are just ahead. For now, the picture is slightly negative.

Conclusion: It is obvious that market participants are still treating minor pullbacks as buying opportunities. Our internal indicators can be interpreted as if they favor more price declines, but in fact they can accommodate a decent move in either direction. I am still looking for that rising wedge to resolve to the downside, but another trip back to the top of the wedge may be necessary.

Dollar: As of 7/23/2013, the US Dollar Index ETF (UUP) is on a Trend Model neutral signal. The LT Trend Model, which informs our long-term outlook, is on a sell signal as of 8/13/2013, so our long-term posture is bearish.

UUP is barely holding onto its recent breakout, and the chart is indecisive.

Gold: As of 9/24/2013 Gold is on a Trend Model sell signal. The LT Trend Model, which informs our long-term outlook, is on a sell signal as of 2/15/2013, so our long-term posture is bearish.

Gold is still stronger than the dollar, and its recent breakout is healthy, if not vigorous. The June-December double bottom remains viable and could be the base for a strong bull leg. The next important obstacle is the top of the declining trend channel.

Bonds (TLT): As of 11/11/2013 The 20+ Year T-Bonds ETF (TLT) is on a Trend Model sell signal. The LT Trend Model, which informs our long-term outlook, is on a sell signal as of 5/29/2013, so our long-term posture is bearish.

TLT continues to maintain a positive short-term picture, and I am focused on the possible August-December double bottom.

The above content was an excerpt from the January 14, 2014 blog for Decision Point subscribers. Click here for a free trial.

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