As of Tuesday, October 11, 2016 at the close of trading EquitySurge™ has continued a strong buy signal for USA equities.
The stock market took a drubbing selloff today, with the S&P500 Index closing down 27 points to the 2136 level. The reason? Pick it: the election, oil prices, rising bond yields, fear about third quarter earnings season, the drop in the British pound, the strength in the US dollar… you name it and it’s a reason for this nervous market to sell off.
Rather than try to pick the reasons why the market goes down one day and up another, we focus on the fuel needed for higher prices over time. And that fuel is liquidity, money flowing into the market, or not. If money is flowing into the stock market, then prices are going to go up over time, regardless of external factors that affect the market on a day-to-day basis. And conversely if money is flowing out of the stock market over time, then eventually you are going to get a sizable correction or bear market.
What we are seeing now and have been seeing for all of 2016 is strong money flow INTO stocks. In fact liquidity measures have just hit new highs so far in 2016 and show no signs of abating. This is creating a divergence where money flows into the market are increasing while stock prices remain stuck in a trading range that goes back to mid-July. Eventually this divergence is going to correct back to equilibrium, and as long as liquidity remains at these elevated levels, it will be stocks that play catch-up to money flow and rise significantly.
In the meantime as the stock market continues to churn in this trading range, we will be taking advantage of selloffs like today to buy or add to existing long equity positions.
If you would like to review the EquitySurge™ trading signals generated so far in 2016 please see the Trading Signal Performance Chart page.