Yesterday the SP500 finally closed above 1850 with a rally in the last 15 minutes of the US session, and in so doing carved out a marginally higher high than December/January, in a club with the Russell 2000 and Nasdaq 100 indices. I do not see a bullish breakout that sets the scene for a new round of gains, because as per my note before yesterday’s session, it is indeed achieved on multiple divergences and is likely to be short-lived.
Volume on yesterday’s SP500 up-day was again inferior to the down-days, whilst treasuries had another up-day despite equities and continues to be a signal. Economic data was again poor and remains divergent. There is a momentum divergence in the SP500 new high versus the previous whilst breadth measures of % stocks above 200 MA and 52 week new highs continue their divergent downtrends. The VIX also shows divergence and the trend exhaustion indicator suggests any further gains will be hard to come by currently.
Current Skew reading:
Current NAAIM reading:
Current Investors Intelligence bull-bear reading:
Plus ISEE equity only call-put reached an extreme yesterday. In short, the rally has lured back in the ‘dumb’ money and I suspect yesterday’s new high close on the SP500 will turn out to be the final bait for ‘all-in’.
The Dow and Nikkei continue to honour my 31 Dec 2013 top call, and are both several hundred points away from a challenge to that. They also both continue to carve out the ‘second chance’ peak of the historic analogs topping pattern. The FTSE, Dow, Russell and Nikkei remain at long term resistances.
I remind you of this:
Tomorrow is the new moon and that sets up the possibility of the other US indices now topping close to it: either yesterday, today or the first couple of days of next week. As March and April are inverted geomagnetism seasonal lows and another geomagnetic storm is currently in progress adding to the recent upswing in disturbances, I have additional reasons for the markets to top here as we exit February.
If we look behind the price action at internals, valuation, sentiment, leverage, technicals and fundamentals (all of which I have covered in detail in posts since the turn of the year) then the short opportunity is clear: this a rip to sell, and there won’t be many opportunities as golden as this.
Let’s see how today unfolds. I prefer to comment once the action is complete because there are many intraday swings currently, as evidenced by all the tails on the daily candles recently (another clue for a trend change), but I will comment intraday if I see something more decisive in progress. A reminder that some sharp selling into the close would set up the potential for a big down day on Monday, particularly with the geomagnetic storm aiding again.