As of Friday, January 6, 2017 at the close of trading EquitySurge™ has continued a strong sell signal for USA equities.
Stocks reacted to the Employment Situation Report with a modest rally that lost strength into the close. The S&P500 Index finished up 8 points to the 2277 level, a marginal new all-time-high.
However this new all-time-high is being made on significantly negative diverging technicals, including more down than up stocks, and the same with volume (more down than up), and less than 4 percent of S&P500 Index stocks making new 52 week highs.
The last time this happened? March 24, 2000, which turned out to be THE high and was followed by a several month trading range and then a dramatic decline of more than 700 S&P500 Index points!
Do things have to go the same way now as before? No, and stocks may continue to grind slightly higher from here as the last of the latecomers attempt to get it. But the reality is that our best indication of future stock price direction, liquidity, is telling us to get out of long equity positions. And when liquidity makes this kind of pronouncement it then becomes only a matter of time before we see weakness in stocks and an eventual selloff, correction or even bear market.
And again this does not mean right now that 2017 is going to be a good, bad or sideways year. It means that liquidity conditions are drying up and the result of that will be a decline in stock prices. The bullish resolution of this would mean a better buying opportunity is coming in stocks, i.e., lower prices, while the bearish implication is that a deeper correction of 10 percent or more may be on the horizon, or even a bear market. But liquidity is not giving us enough information yet to make that determination; it is just saying to get out of longs right here right now and then be ready in cash.
If you would like to review the EquitySurge™ trading signals generated so far in 2016 please see the Trading Signal Performance Chart page.