The Swiss team have reported and they have provided a near term toppish recommendation on the lead sp500 index.
The rational is a combo of:
1) over bought momentum. Correct for the lead indexes like dow transports, health and semis although many other indexes remain with low rsi’s and relatively unloved. It is very poor trading practice to short spikes in momentum indicators team. You short the divergence not the spike and divergence is close to zero at present. If anyone wants to discuss this please pick this issue up on the forum pages. If its one lesson to write hard to the memory it is surely this one.
2) The weak market breadth is also sighted by the team although on the latest higher high it was the highest level of stocks above their 52 week highs since the first few trading days of March in fact. Stocks above their 200dma were at 80% on the higher high which again is a healthy breadth level in fact and an improvement on prior breakouts. My point here is that breadth is not in itself indicating a top here. Selectivity is unless this broadens quickly!
3) Vix new lower low. Yes volatility is unhealthily low (especially for financial speculators and underwriters of hedging products, eg Barclays latest investment nos!). If only the put call was confirming the over bullishness or AAII, then we could agree.The team themselves acknowledge this is not the case here and now.
“The 5-Day CBOE Put/Call ratio is heading to rather low levels and the AAII Bullish Consensus is
back at neutral levels, which means the sentiment anomaly has been worked off.”
My own practice found a fairly a neutral overall position on the data. In a huge bull market continuations usually occur on neutral technical data team. On the three issues raised i’m unconvinced, as yet. The strongest point is selectivity and overbought within this. If this rally, if it is to sustain, as i said above, needs to broaden! The trade is a mean reversion trade, for now. The nik225, etc alongside a broader set of US sectors needs join the party, if they don’t another set back certainly beckons.
They remain bullish gold and the euro. No mention the AUD and commodities specifically. The jury out on the asset class for now.. The AUD close to her price support.
Without any more delay here the guys own words.. Next week’s is delayed by a day due to public holidays in Switzerland!
Rich