As of Thursday, November 17, 2016 at the close of trading EquitySurge™ has continued a hold signal for USA equities.
The stock market rallied today, but liquidity is not showing any signs of life, and this is now of great concern.
The stock market can rise over a short period of time for any number of reasons, but for a rally to last the market needs liquidity and lots of it. We had that condition starting around the middle of last February when liquidity flooded the market and stocks took off higher for a substantial gain over a sustained period of time – all the way up until the late-Summer new all-time-highs. Liquidity kept making new 2016 highs even after stocks peaked in late August, a promising sign for more new highs to come for stocks as well. However what we got instead was a prolonged decline in stocks from late Summer all the way into the days leading up to the presidential election. Now after the election outcome stocks have skyrocketed higher – all the way back to very near or even higher than the Summer highs. However liquidity has dropped precipitously and is not showing any signs of life, especially considering stocks have gone all the way back up.
The condition we find ourselves in with the market today is not one of excitement but rather of great concern, as stocks cannot maintain this rally without liquidity. Like a car running on fumes, eventually the engine is going to stop and the car is going to decelerate.
We are very close now to generating a sell signal for equities; however we will continue to monitor liquidity and see if it begins to rise over the very near term, but it would not be imprudent to consider taking profits on long equity positions as we reach back up to the all-time-highs…
If you would like to review the EquitySurge™ trading signals generated so far in 2016 please see the Trading Signal Performance Chart page.