Sunday, February 5, 2017

Meandering Along

Last week I indicated that at least a short term pullback was likely in the SPX as the overall Indicator Scoreboard reached the SELL level, but that I was becoming less bearish for a strong pullback immediately. For the week, the SPX dropped from 2300 to 2267, then closed at 2297.  More upside is likely early in the week, probably SPX 2305-20, before a stronger pullback targeting 2230.  Using the same indicators as last week, the current topping pattern is becoming more like the Apr-June 2015 period and appears to be extending into March of 2017.

The overall Indicator Scoreboard spiked somewhat higher on the basis of higher put/call ratios, not unlike the first half of 2015.

The Short Term Indicator (VXX $ volume and Smart Beta P/C), however, moved lower similar to the May 2015 high, leading credence to a stronger pullback than last week from next week's high.

The TRIN (as a measure of net adv issues to net volume) continues to move higher with lower supporting volume and is also in a similar position as the May 2015 top.

The VIX P/C saw a fairly sharp spike lower during the week before moving higher at the end of the week, again not unlike the period immediately preceding the May 2015 top.

Interest rates (TNX) continue to consolidate in a narrow range around the 2.5% breakout zone while bearish sentiment remains at fairly low levels.

The gold stocks (HUI) did make a slightly higher high last week, but both the 5 and 10 day EMAs dropped down to the SELL level.

Conclusion. I was expecting more immediate downside as a result of the positive "January effect", but both the pullback early in the week and the consolidation period in bonds indicates a more lengthy topping process.

Weekly Trade Alert.  It's becoming more difficult to come up with specific targets, but I will be looking for SPX 2305-10 as a shorting zone with stops above 2320.  Updates @mrktsignals.

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