As of Thursday, December 8, 2016 at the close of trading EquitySurge™ has continued a strong sell signal for USA equities.
The stock market went up again today, with new all-time-highs for every major index. The market is in a euphoric state and generating a blow-off top. We know this because liquidity is warning us that something is wrong.
It’s always nice to see a strong rally higher in stocks, however this rally is becoming unhinged and the danger of staying long is rising.
How high could the S&P500 Index go before this move terminates? Here is a daily chart of the SPX (S&P500 Index) showing the Fibonacci retracements from the Summer high to the low on November 4th. The 161.8% retracement resides at 2261. The next retracement beyond that is the 261.8% retracement all the way up at 2371. The RSI has already become overbought, and while prices can certainly keep going higher in this condition, the 161.8% retracement at 2261 is a very likely target for this blow-off move.
The S&P500 Index may reach the 2261 level target and then consolidate there for some time, but in all likelihood, especially with what liquidity is telling us about this rally, risks will rise substantially beyond 2261.
With the warning from liquidity in mind, taking profits on longs from here to 2261 is a very prudent step, and the definition of buying low and selling high.
If you would like to review the EquitySurge™ trading signals generated so far in 2016 please see the Trading Signal Performance Chart page.