On July 31 I reported to subscribers of the Wall Street Examiner Professional Edition that a new cyclical projection pointed toward the Standard and Poors 500 ($SPX) reaching 1442 within 6 weeks. It reached that level on September 13, 6 weeks and one day later. I was wrong. I missed by one day! But wouldn’t you still like to know what those cycle indicators are saying now? Are they till bullish or even more bullish? Here’s a quote from that report.
The market’s pullback continues the recent indecisive, inconclusive pattern, but the 6 month cycle generated its first upside projection, pointing to a high of 1442 due within 6 weeks or so at most. Whether it gets there depends on how the market responds this week to the Fed, and Friday’s jobs news. I’m leaning toward a bullish resolution based on the both the technical and liquidity factors, as well as stronger than generally understood economic data, which I have covered on the free side of the Wall Street Examiner. If the jobs number beats consensus expectations, the market should take off.
Each report already posted and the next report to be posted on Sunday begins with a similar summary outlook that will answer that question, and follows with charts and analysis of the cycle indicators along with standard analysis of trends, support and resistance in 12 heavily illustrated and information packed pages. Click here to view the entire July 31 Market Update.
In addition to the daily market updates each evening and the similar daily Precious Metals updates each morning covering the outlook for gold and for the precious metals stocks, there are two weekly reports on the major influences on market liquidity. One is the Fed Report and the other, the Treasury Report. Both are much broader in what they cover than what their titles imply. Both contain reams of data, charts, and information, that will help you better understand the market liquidity context that is all important in understanding and foreseeing market price trends.
The July 31 Fed Report was also bullish, with the usual caveats.
The composite liquidity indicator had a tiny downtick last week. The indicator has remained essentially flat for most of July, but is still firmly entrenched in a strong uptrend…
The Fed’s buying of MBS and the slight tilt of Operation Twist toward more purchases from Primary Dealers than sales to them, will remain a bullish influence at least until year end. Large bank trading account patterns are still bullish while bank net Treasury purchases are back to a neutral pattern. Net bank inflows are in a slightly bullish intermediate trend, while reserve deposits at the Fed remain in a neutral pattern. Foreign central bank purchase patterns have improved from bearish to neutral.
Taken as a whole, that should be enough to keep Treasuries at very low yields and to continue to give stocks a boost. It’s too soon to tell if there’s a sentiment shift under way away from Treasuries. All else being equal, that would work in favor of strengthening equities, but if yields head to new lows, stocks should roll over. Liquidity, while bullish, still seems insufficient to support bull moves in both
Note that since then the liquidity indicators had become even more bullish even before this week’s Fed move.
At over 100 pages it is not for the uninterested or the faint of heart. Do NOT attempt to view or read this report unless you like lots of charts, data, and clear analysis, and unless you have some knowledge of how the Fed, Primary Dealers, Foreign Central Banks, and the banking system work together to move markets. But if you are interested in those things, fear not, the executive summary covers the key points with charts in just a few pages that you can read in 5 minutes. However, I am not responsible for any brain injuries that may occur if you are not qualified to view this mind blowing material. Here’s that report (click to view).
And from the Treasury report of July 28-
Here are the key bullet points in this report.
· Net new Treasury supply for the July 31 settlement will be the heaviest it has been since July 15, 2011. The shift in sentiment on Friday suggests that it will be more of a problem for bonds than stocks.· After Tuesday, supply will be light until the end of August. The markets will not have to face that as an obstacle.· The 10 year Treasury Yield has been at a major inflection point as it set a minor new low at a key technical level. Friday’s action suggests a turn, but confirmation is needed.
· Withholding tax collections reached a 4 week average real gain of 3.75% year to year, suggesting for a second week that economic data may come in better than consensus expectations for weak growth. That could be the Treasury bubble’s death star.
· Withholding tax collections weakened over the past 10 days, but it looks like a normal fluctuation so far. If the 4 week average drops below a 2% real gain, that could be trouble.
· With revenues up, outlays are running slightly below last year. Spending has not kept pace with revenue gains. No unexpected increases are likely in Treasury supply. If anything, supply going forward could be slightly lower than expected. The impact would not be material.· Bond fund inflows picked up again but are still down 30% from the April peak.· FCB buying of Treasury paper increased last week, triggering a possible buy signal, but the recent pattern has been choppy, so I expect that this too will not be sustained.
· Primary Dealers sold Treasuries in the week ended July 18. The Primary Dealer Treasury buying panic reached a crescendo in the week ended June 6, leading to them mostly selling since then. The indicator is nearing a significant trendline. If broken, that could be an important signal that the Treasury market buying panic is ending.
· Commercial banks had been heavy buyers of Treasuries in two of the previous 3 weeks, with purchases hitting record levels. In the week ended July 18, they were sellers again, leading to the question of whether that buying surge was another sign of the final blowoff of the Treasury market.
· The dollar pulled back after reaching intermediate price objectives as well as a trend resistance line. The trend still looks bullish longer term as the medium of exchange of the Last Ponzi Game standing, but if key support in the 81 area breaks, that game could be over, with negative repercussions for Treasuries, and positive implications for gold and other money substitutes like oil. The question is whether stocks would also be seen as one of those.
Here’s that report in full, including 30 pages of charts that tell clear stories, along with clear explanations and analysis of the data that goes into them.
I wanted to share these with you to show you exactly what you can receive each week as a subscriber. If you are a professional investor or trader, or self directed individual investor who wants to cut through the media spin and understand the forces that really drive markets, and in so doing stay ahead of the herd, these reports can help you do that. I invite you to try them for 30 days at no risk. If you are not satisfied, I will thank you for trying the service and refund your initial good faith deposit covering the first term subscription fee in full, immediately. But I think that you will find the insights you gain from these reports to be comparable or superior to the best quality institutional research costing many times the cost of this subscription.
Join the conversation and have a little fun at Capitalstool.com. If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter.