Weekly Economic Update 02-24-2017

In a rare event, this week the Dow eked out an 11-day consecutive win streak, which is a streak usually reserved for the early phases of an economic expansion and not the late stages like we are in now. Corporate earnings need to increase 30-40% this year to justify current valuations, meaning investors today will likely have to way until 2019 for those valuations to materialize provided the economy can grow. Yet people have forgotten what happens to overvalued markets: 1987, 2000 and 2008 are but faded memories…

Bob Farrell’s Market Rule #4: Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.

Client Update: Looking at historical trends bonds should lead the back with miners and metals following in that order. The recent trend has been miners, metals and bonds. The longer-term bullish trend is intact, but this recent move just felt wrong, until today.
I have been expecting a pull-back from the miners for a few weeks now along with a pull-back in metals. Miners have been moving down and are now showing signs of hitting my target buy zone, just as metals are making short term highs. Meanwhile Treasury bonds have been slowly picking up steam and showing signs they will be breaking to the upside in the near term.

What I see now is that the metals are lagging the miners as they usually do. And Treasuries, which have bottomed are going to lead the pack. Simply, things got out of order but they appear to be lining back up. Hopefully within the next week or two the miners will move down to their 21-day moving average on the weekly scale which would signal a buy in.

If you are worried we missed the big rally, we didn’t. What I expect to see is miners retrace near my target buy point and then make another attempt at breaking to new highs. The good news is that momentum on the weekly charts is bottoming, which suggests the rotation to the upside is coming. This is exactly what we want to see.

Bonus Section: CPI index vs M2 Money Stock; CPI vs Average Hourly Earnings; S&P 500 volume analysis; support and momentum analysis for: 10-year Treasury yields and Gold Miners, and Treasury bonds; Treasury bond volume analysis; percentage of stocks trading above their moving averages; total put/call ratio; and charts from the recent Commitments of Traders report.

Weekly Update (3 min):

  • Existing Home Sales Up, Mortgage Applications Down
  • Will the Fed Raise Rates?

Bonus (9 min):

  • Consumer Price Index vs M2 Money Stock vs Recessions
  • S&P 500 Volume Analysis
  • 10-Year Treasury Yield (TNX) Support Levels & Price Targets
  • Vaneck Vectors Gold Miners (GDX) Support Levels & Price Targets
  • iShares 7-10 Year Treasury Bond (IEF) Support Levels & Volume Analysis
  • S&P 500 vs % of S&P 500 Stocks Above 50-day MA
  • S&P 500 vs % of S&P 500 Stocks Above 200-day MA
  • S&P 500 vs Total Put/Call Ratio Relative to its 20-day MA
  • Commitments of Traders – S&P 500
  • Commitments of Traders – 10 Year Treasury Yield
  • Commitments of Traders – US Dollar
  • Commitments of Traders – VIX