As of Thursday, December 29, 2016 at the close of trading EquitySurge™ has continued a strong sell signal for USA equities.
Stocks were mostly flat today after yesterday’s sell off, with the S&P500 Index closing near unchanged around the 2249-2250 level.
Liquidity was generally unchanged today as well, with the message remaining to sell equities at these levels and build a cash position.
We have had several inquiries about the current strong sell signal and if that means that 2017 is going to be a bad year for stocks. The answer is that current liquidity conditions are telling us to take profits on long positions and go to cash. This does not mean that 2017 is going to be either a good or a bad year for stocks, but rather that right now prices have gotten ahead of themselves and the rally from the January-February, 2016 lows is running its course. The year ahead could turn out to be a fantastic year for stocks, but a much better buying opportunity (read significantly lower stock prices) could be on the way over the coming weeks, so having a large cash position as a result of taking profits now, will allow you to take advantage of those lower entry prices.
On the other hand liquidity conditions could continue to deteriorate and something more ominous could be in the works, including a powerful correction of 10 percent or more, or even a bear market.
But we don’t have enough information yet to be able to tell for sure. So the takeaway right now is that liquidity is telling us today to get out of long stock positions and get to cash, and after the year equities have had in 2016, this is the ideal way to sell high so that you are ready with cash to buy low at some point in the future.
If you would like to review the EquitySurge™ trading signals generated so far in 2016 please see the Trading Signal Performance Chart page.