Stocks inched further into record territory today before fading slightly in the afternoon. The market is interpreting Yellen’s remarks before Congress as dovish—keeping rates lower for longer—and recent experts on our show, like Mizuho’s Chief US Economist Steven Ricchiuto, believe Fed forecasts for a pickup in growth and inflation later this year are unlikely to pan out (see interview).
Using a Renko trend following model, let’s identify whether the trend is positive or negative on a short-term, intermediate-term, and long-term basis for stocks (SPY), bonds (TLT), gold (GLD), the US dollar (UUP), and oil (USO).
(Note: For tracking purposes, I will be using the underlying indices when available rather than the ETFs for each of the above categories since there is a slight divergence between the two, with the underlying asset or index being the most important to watch.)
Stocks: The trend for U.S. stocks using the S&P 500 is positive on all timeframes and pushed higher on a short-term basis this week. The short-term trend turned positive (issued a buy signal) earlier this month on 2/5/2015. The intermediate-term trend has remained positive (on a buy signal) since 10/24/2011. The long-term trend has been positive (on a buy signal) since 2/1/2012.
Here is a Renko daily chart (showing support and resistance levels) of the S&P 500 over the last six months with white and red boxes indicating the direction of the short-term trend. Renko “buy” and “sell” signals only appear when price changes and volatility exceed a certain threshold and, thus, attempt to eliminate noise by focusing only on changes in the underlying trend.
Bonds: Using the iShares Barclays 20+ Year Treasury Bond Fund (TLT), the short-term trend for bonds has been negative since 2/6/2015. The intermediate-term trend also turned negative this month on 2/9/2015. The long-term trend has remained positive since 8/1/2014.
Here is the short-term trend chart.
Gold: The short-term trend for gold turned negative on 2/6/2015. The intermediate-term trend turned positive on 1/12/2015 and the long-term trend has been negative (on a sell signal) since 12/1/2011.
Here is the short-term trend chart.
Dollar: The short-term trend for the dollar turned negative on 2/3/2015 and is unchanged given the consolidation since. The intermediate-term trend turned positive on 8/25/2014 and the long-term trend turned positive on 12/1/2011. (Note: To read Chris Puplava’s recent analysis on the US dollar and the potential for a further correction, click here.)
Here is the short-term chart showing the recent sell signal issued earlier this month.
Oil: Using West Texas Intermediate Crude, the short-term trend for oil turned positive on 2/3/2015. Both the intermediate- and long-term trends are still negative.
Here is the short-term chart going back over a year, which shows the continuous sell signal in place since 7/30/2014 that only recently reversed direction this month.
