Sunday, February 19, 2017

A Top Could Come at Any Time

Last weeks forecast of an up week for option expiration proved correct although the forecast of SPX 2330-50 was beaten by one point.  Short term the outlook is more cloudy.  With so many convinced of SPX 2400 or 2500 immediately ahead, a turn down could occur any day, so all I can say is that a significant top should occur in the next two to four weeks.

Looking at the indicators, overall Indicator Scoreboard saw a sharp spike downward to the fourth lowest level of the last two years on the back of capitulation in the Put/Call ratios.  This may indicate a short term pullback next week before a rally to a final high in March.

Looking at the Indicator Scoreboard long term, current optimism is a near mirror image of the pessimism resulting from the January 2016 decline.

The Short Term Indicator (VXX $ volume and Smart Beta P/C) is little changed showing lack of strong downward pressure.

Bearish sentiment for bonds (TNX) continued to drop longer term, even as rates consolidated in the middle of the recent trading range.

Finally, the gold stock sentiment (HUI) remains firmly in the SELL region as the HUI seems to be consolidating lower.

Conclusion.  As I mentioned a couple of weeks ago, a move toward SPX 2400 is possible, but sentiment has reached such an extreme that I would not be surprised by a premature failure.

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

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