As of Friday, December 16, 2016 at the close of trading EquitySurge™ has continued a strong sell signal for USA equities.
Markets were more volatile on Friday with stocks spending most of the day to the downside. By the close the S&P500 Index was down 4 points to the 2258 level, off the day’s lows.
Liquidity rebounded early from Thursday’s drop, but then declined again, finishing the day at the lows and continuing its warning to get out of long stock positions.
We mentioned several days ago that the S&P500 Index Futures hit an important Fibonacci retracement price target calculated from the Summer highs to the election night low. The 161.8% retracement resides at 2273 and was the high of the day on December 13th. Futures have not returned to that price level since. See the chart below for details:
If you are still long equities you are likely taking on extreme risk at these price levels. In addition to our primary indicator of stock market direction, liquidity, telling us to get out of long stock positions, the S&P500 Index Futures have hit and pulled back from an important Fibonacci price target, and now other technical indicators are also flashing warning signs at current price levels.
Our goal at EquitySurge is to help investors buy low and sell high. We have been long the stock market since January-February of this year around the 1850 level on the S&P500 Index, based upon the strong indication from liquidity at the time that conditions were rapidly improving for much higher stock prices. This is buying low.
Now at the end of the year we have the S&P500 Index near the 2260 level, but liquidity is telling us that support for higher prices has eroded significantly, and is warning us that it’s time to exit long positions and go to cash. This is selling high.
You may find that during the next few weeks as we enter the Christmas and New Year holiday period that stocks manage to maintain current price levels or even make marginally higher highs, but liquidity is warning us to exit long equity positions, and this is advice that should be heeded.
If you would like to review the EquitySurge™ trading signals generated so far in 2016 please see the Trading Signal Performance Chart page.