Sunday, February 26, 2017

Not There Yet

Signs are beginning to mount that an important top is nearing.  As mentioned in the January 15 post, much of the ammunition for the current rally is the anticipation of new tax and spending policies.  However, as a non-politician Trump and his believers have underestimated the time for government actions.  The latest figures are for tax reform by August and infrastructure spending by 2018. This is reflected in two of the MISC indicators (not in composite) that are mentioned later.

The overall Indicator Scoreboard is maintaining its position near the SELL range.

The Short Term Indicator (VXX $ volume and Smart Beta P/C) continues to be range bound in the moderately negative sentiment range.

The MISC indicators that I mentioned several weeks ago, as not confirming a potential top, are now moving closer to the SELL region.  The VIX P/C and TRIN charts are shown below.  The TRIN (showing net adv issues/net volume) has risen to the highest level since last Sept, indicating that supporting volume is drying up as prices advance.

Interest rates fell (TNX) even as sentiment remained mildly bearish, probably due to news of the delayed Trump stimulus.

Finally, the gold stock sentiment (HUI) remains in the SELL region as mining stocks posted a modest retreat.

Conclusion.  At least one well known EW analyst, Pretzel Logic, feels that the 5th wave may be complete. This may be so, but sentiment indicators do not indicate risk of strong downside just yet, mid-March is appearing more likely to be the point of maximum risk.

Weekly Trade Alert.  None for this week.  Updates @mrktsignals.

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