Chart of the Day - Market Cycles and Sectors

A close look at sectors can tell us where we are in the economic cycle. The chart below from Chris Vermeulen via LinkedIn shows that the dominant sectors currently are utilities and precious metals which occur typically at the very end of business cycles as we enter a major bearish phase:

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning June 27

Indicator	Weekly Level / Change / Significance	Implication for S & P 500	Implication for Nifty*
S & P 500	2037, -1.63%	Bearish	Bearish
Nifty	8089, -1.00%	Neutral**	Bearish
China Shanghai Index	2854, -1.07%	Bearish	Bearish
Gold	1319, 1.34%	Bullish	Bullish
WTIC Crude	47.57, -2.64%	Bearish	Bearish
Copper	2.12, 3.14%	Bullish	Bullish
Baltic Dry Index	609, 3.75%	Bullish	Bullish
Euro	1.115, -1.50%	Bearish	Bearish
Dollar/Yen	102.35, -1.71%	Bearish	Bearish
Dow Transports	7320, -3.55%	Bearish	Bearish
High Yield (ETF)	35.10, 0.43%	Neutral	Neutral
US 10 year Bond Yield	1.58%, -2.41%	Bullish	Bullish
Nyse Summation Index	772, -1.44%	Bearish	Neutral
US Vix	25.76, 32.72%	Bearish	Bearish
20 DMA, S and P 500	2021, Above	Bullish	Neutral
50 DMA, S and P 500	2092, Below	Bearish	Neutral
200 DMA, S and P 500	2080, Below	Bearish	Neutral
20 DMA, Nifty	8192, Below	Neutral	Bearish
50 DMA, Nifty	7993, Above	Neutral	Bullish
200 DMA, Nifty	7775, Above	Neutral	Bullish
India Vix	18.63, 7.36%	Neutral	Bearish
Dollar/Rupee	67.90, 1.24%	Neutral	Bearish
Overall	S & P 500	Nifty
Bullish Indications	5	6
Bearish Indications	10	11
Outlook	Bearish	Bearish
Observation	The Sand P 500 and the Nifty were down last week following Brexit. Indicators are bearish. Markets are breaking down from resistance and are headed significantly lower in the near term.
On the Horizon	China – PMI, Japan – CPI, Canada - GDP, Euro zone – German employment data, CPI, Euro Zone CPI, Euro vote on Brexit, U.S – Consumer confidence, Personal consumption expenditure, ISM
*Nifty	India’s Benchmark Stock Market Index
Raw Data	Courtesy Google finance, Stock charts, FXCM
**Neutral	Changes less than 0.5% are considered neutral

The US market the Nifty fell last week. Signals are bearish for the upcoming week. The markets are breaking down after failing at resistance several times. The Vix, Transports and the Yen are flashing crash alerts.  The India Vix is much lower than the US Vix suggesting complacency. There could be a catch up to the downside in the Indian Market soon. The critical levels to watch are 2050 (up) and 2025 (down) on the S & P and 8150 (up) and 8000 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets. You can check out last week’s report for a comparison. You can also check out support and resistance levels of the S and P 500 and Nifty Indices. Love your thoughts and feedback.

Gold Rush Coming?

Is a gold rush coming much like in 2000 and have gold bears got it wrong this time around, Here is an interesting take from our partners at the The WallStreet Window:

Proof that the Gold Bears are Wrong – Mike Swanson

I am bullish on gold and I own gold and mining stocks, because gold is in a bull market. I have been trying to do my best to tell people this, but many people simply do not believe it. Gold and the mining stocks went through a very brutal bear market for five years and that makes it hard for people to believe that any of the rallies are real.

 What is more there are several “experts” that keep calling for gold to fall to $1,000 or even $250 an ounce that are scaring people out of gold. If you read this post you will see why these gold bears are wrong and know the one thing you need to know now that proves that gold is in a new bull market.
Then you will know that you do not have to be afraid and that you can take action. This is why people are looking at it.



What people are seeing is a rally up to $1,300 in gold this year and a pullback of that level happening right now.That pullback is making gold bears call for a crash again and scaring people out of gold and I know because I am getting lots of emails from people scared or trying to jump out of mining stocks in hopes of buying in at a much lower price.

This rally in gold has brought an over 100% gain for most mining stocks and has made the mining stock sector the best performing sector in the entire stock market so far this year. Those in mining stocks this year are killing the stock market. And yet people are scared of a giant gold drop. Here is what I see:




When you step back and look at the big picture of gold it is obvious that gold was in a bear market for a few years. You know that, but what is important is that during bear markets the 150 and 200-day moving averages slope down and act as resistance. But in January gold smashed through these moving averages and now those moving averages are turning up to act as support. I use classic stage analysis to identify whether a market is in a bull or bear market and it is obvious that gold is in a bull market now:



There are four stages to a financial market cycle in a stock or an entire financial market. As you know you can have a bull market. Before a bull market starts though you usually have a stage one basing phase in which a market simply goes sideways and builds a base. Then it breaks out and begins a full blown stage two bull market that typically lasts for several years. Then there is a stage three topping phase and then a stage four bear market.

There are various technical indicators you can use to determine when these stages are coming to an end so you can make the proper adjustments. That's a topic a little too big to get into now, but we can look at the basics right now. I can quickly show you one important indicator to watch to identify the trend the market is in. That's the long-term 150-day moving average, which is simply a line plotted on a chart using the average price number of the past 150-days.

In a bull market this line slopes up on a chart and the price of the market tends to stay above it, so it acts as a nice price support level in a bull market to make for a good entry point timing mechanism.
In a bear market this line slopes down on a chart and the price of the market tends to stay below it and it acts as resistance. So you can use this moving average to quickly identify the trend of a market. Then you can know if you should be bullish on a market or not.

Of course I have been pointing this out for the past several months and it has not stopped the gold bears from predicting more gold crashes and has not stopped people from trying to jump in and out of gold every time there is a little weakness so let me show you one more thing that is even more important. There is a huge powerful trend that happens in gold bull markets and that is that the mining stocks tend to lead the price of gold higher.

In bear markets the opposite happens. When there is a gold bear market the mining stocks tend to fall much more than the price of gold does. At big tops in gold and silver the mining stocks often stop going up. So when silver prices made a final top in 2011 the mining stocks simply sat there as silver went higher.

And now this year the mining stocks are leading gold up. When gold has a temporary pullback they just come off their highs a little bit and then go up more. Now you can chart out whether the mining stocks are doing better than gold or worse by using the simple HUI divided by the price of gold ratio.
Take a look at it:



As you can see the mining stocks lagged gold for years and a few months ago just started a new huge powerful trend of leading gold higher and outperforming gold.This is a huge predictor of gains to come for both mining stocks and gold and proves that the gold bears are simply wrong and mistaken.

For more on this visit our partner Michael Swanson on his website www.wallstreetwindow.com.

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning June 20

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	2071, -1.19%	Bearish	Bearish
Nifty	8170, 0.00%	Neutral**	Neutral
China Shanghai Index	2885, -1.44%	Bearish	Bearish
Gold	1302, 1.98%	Bullish	Bullish
WTIC Crude	48.86, -0.04%	Neutral	Neutral
Copper	2.05, 1.33%	Bullish	Bullish
Baltic Dry Index	587, -3.93%	Bearish	Bearish
Euro	1.122, -0.22%	Neutral	Neutral
Dollar/Yen	104.22, -2.51%	Bearish	Bearish
Dow Transports	7590, -2.25%	Bearish	Bearish
High Yield (ETF)	34.95, -0.94%	Bearish	Bearish
US 10 year Bond Yield	1.62%, -1.28%	Bullish	Bullish
Nyse Summation Index	784, -20.89%	Bearish	Neutral
US Vix	19.41, 13.98%	Bearish	Bearish
20 DMA, S and P 500	2089, Below	Bearish	Neutral
50 DMA, S and P 500	2078, Below	Bearish	Neutral
200 DMA, S and P 500	2017, Above	Bullish	Neutral
20 DMA, Nifty	8123, Above	Neutral	Bullish
50 DMA, Nifty	7935, Above	Neutral	Bullish
200 DMA, Nifty	7768, Above	Neutral	Bullish
India Vix	17.35, 8.64%	Neutral	Bearish
Dollar/Rupee	67.06, 0.14%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	4	6
Bearish Indications	10	8
Outlook	Bearish	Bearish
Observation	The S and P 500 fell and the Nifty was unchanged last week. Indicators are bearish. Markets are breaking down from resistance. Time to tighten those stops.
On the Horizon	Euro zone – German ZEW survey, England – Brexit vote, U.S – Durable goods
*Nifty	India’s Benchmark Stock Market Index
Raw Data	Courtesy Google finance, Stock charts, FXCM
**Neutral	Changes less than 0.5% are considered neutral

The S and P 500 fell and the Nifty was unchanged last week. Signals are bearish for the upcoming week. The Vix, transports and the yen are flashing major warning signs. The markets are breaking down from resistance and are likely to continue major breakdowns in 2016. The critical levels to watch are 2080 (up) and 2060 (down) on the S & P and 8250 (up) and 8100 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets. You can check out last week’s report for a comparison. You can also check out support and resistance levels of the S and P 500 and Nifty Indices. Love your thoughts and feedback.