Gap down, gap down, gap up, gap up. That leaves us about where we were before the 20th, when the market rallied all week because the "experts" were forecasting a "no" vote on Brexit.
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I would think that there is much more market risk today than there was two weeks ago, now that the EU is just beginning to crumble. This is a little like skating out further on the ice lake, even though you just heard a big crack. Nothing to worry about... yet.
We're slightly overbought at this point on the short term chart, but certainly could go higher without starting the engine on fire. Another few days of float up sounds about right, with end of quarter window dressing, and 4th of July holiday upcoming.
I now have two of my systems with bullish crossovers, so the composite system is reading +1, a mild buy signal. I will have to think about jumping back in, possibly for just the next few days to take us into the first part of the month.
CURRENT ALLOCATION: 100% I AS OF C.O.B. 5/22/2017
Airlift, I've decided to hold my cash position for now. Three reasons:
1) A July 4th rally would most likely only mean a one day rally (tomorrow)
2) Composite system is not on a full buy signal
3) Short term RSI is currently near 70, so a pullback or consolidation is most likely before any meaningful advance
Of course, these are only my opinions. Everyone has their own reasons for being in or out of the market, but if you decide to go in, I hope you make boat loads of money.
CURRENT ALLOCATION: 100% I AS OF C.O.B. 5/22/2017
Very glad I did not go in today.
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Looks to me like we are topping out on the 60 minute chart. That's a hell of a V shaped dip and recovery. Do you think we'll keep going up on the same trajectory to exceed 2120? That looks to be the next target.
With an RSI now at 74, the "hot engine" light is flashing, and the engine is starting to knock. Who knows, maybe the Central Bankers will keep the throttle floored for another day, possibly two. Eventually the engine is going to have to cool off, IMHO. If I was in, I'd be very tempted to protect my profits over the long holiday weekend, but that's just me. Call me chicken, but I think getting in now is high risk, low reward.
CURRENT ALLOCATION: 100% I AS OF C.O.B. 5/22/2017
Short term chart is still overbought, though not as overbought as yesterday.
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Let's call the RSI at 71. Yep, that's overbought. Could we go higher on Tuesday? Sure, that's a possibility, and maybe a strong one, as the first trading day of the month is usually positive as monthly money goes to work. Yesterday I was glad I didn't buy in, now I'm thinking I should have gone in just for the (possible) two day bump.
The other item I will have to consider over the weekend is this: My composite system has now gone +3, a full on bullish signal. So the question is; do I buy in on Tuesday, when we could be at a short term high, or wait for a pullback? It's at the core of every trader's dilemma... should you follow your system to the letter, or modify it based on temporary conditions.
Right now I'm leaning towards waiting for a short term pullback, as Tuesday could run the markets higher. The thing I need to be careful of is waiting for a pullback that doesn't materialize. That is exactly what happened to me during the Feb-Mar run-up. Kept waiting for a pullback, and it never came, and it's why I'm negative YTD.
Right now with the S&P at 2103, we're only 1.5% from the all time high near 2135. Logically, it makes no sense to be charging higher. This market is so frothy and overbought, but it may not matter. Sky high P/E ratio's don't matter. EU falling apart doesn't matter. Bond yields tanking world wide don't matter. Maybe RSI's above 70 don't matter either?
Meanwhile, I hope everyone has a safe and relaxing holiday weekend.
CURRENT ALLOCATION: 100% I AS OF C.O.B. 5/22/2017
Have a Happy Independence Day!
Hard to believe that logic prevailed in the markets today.
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A "minor" pullback of 14 S&P points was enough to cool down the engine to an RSI of 56 - about normal operating temperature. I decided to hold off going back into the markets, even though my composite system is at +3. It sure appeared today that markets world-wide were pulling back rather strongly, so it made sense to see how far a pull back we're going to get.
Meanwhile, the VIX is starting to ramp back up, and it may not take much for it to flip to a bearish signal. My guess is we're going to go down to test the 2050 area, and if that fails, possibly the 2025 area.
Composite system remains at +3, but just barely.
CURRENT ALLOCATION: 100% I AS OF C.O.B. 5/22/2017
Does today's turnaround signal that the downtrend is over?
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Everything was in the red early this morning, then a number of big buy orders came in repeatedly throughout the day to lift the market higher. At this point, I'm going to guess that we may float higher tomorrow, as there seems to be more positive signs than negative. All three of my systems remain in the bullish camp, but all of them are right on the cusp of easily crossing the fence to the downside.
AGG now has an RSI of 79.94. Must be some kind of record, I've never seen it that high.
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Where's the fire extinguisher when you need one? That chart needs a cool down.
Mr. Tran sure look like he's slumping over badly. Not a good sign for a healthy market. Even the Nasdaq doesn't look that well. Financials sure look weak too. This market just doesn't get me real excited about jumping back in.
CURRENT ALLOCATION: 100% I AS OF C.O.B. 5/22/2017
Mr Market sure is skittish. Started the day with a pop higher, then sold off for the rest of the day, until the final hour brought more buyers in.
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So far, the market has been unable to take out the July 1 high of 2108 in convincing fashion. As soon as we hit that area today, the rally fell apart. The market really needs to take that out and then bust through 2120 to give the bulls fuel for their fire. If it fails that test, look out below for a test of 2025.
Technically, my VIX system had a bearish crossover, but just barely. That puts my composite system at +1, a mild bull signal. Tomorrow may bring resolution one way or the other with the jobs report. Once again, will good news be bad news for stocks, or vice versa? With this insane market, it's hard to tell what will happen.
CURRENT ALLOCATION: 100% I AS OF C.O.B. 5/22/2017
Big gap higher at the open, and continuous buying throughout the day. So now we sit at 2130, just a hair away from the all time high of 2135 that was printed last May.
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So where does this leave us? Is there enough strength left in the market to rocket right through the all time highs? Does the historically high P/E ratio matter anymore? Does it matter that earnings peaked in 1Q 2015, and have been declining ever since? Does the EU falling apart put a damper on world finance? (Or Italian banks, or slowing Chinese economy, or Japan, or... fill in the blank). To me, the market rocketing higher seems absolutely insane. The market leaders, Mr Tran, and Nasdaq, are both a long way away from their respective all time highs.
We're once again short term overbought with an RSI over 72, which suggests a pullback is due.
Meanwhile, the daily RSI is at 60, so not too dramatic there. Today's daily volume was not impressive - below it's 50 DMA. Mr VIX collapsed to 13.20, a sign of complacency.
Composite system now reads +3, a full-on bullish signal. I'm thinking a pullback is in the cards next week, at least on a short term basis.
Finally, with all the crap that's gone on throughout the country this past week, if you see someone with a scowl, and in need of a smile, give 'em one of yours.
CURRENT ALLOCATION: 100% I AS OF C.O.B. 5/22/2017
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