As of Friday, January 27, 2017 at the close of trading EquitySurge™ has continued a strong sell signal for USA equities.
Stocks declined slightly on Friday, with the S&P500 Index closing down 2 points at the 2295 level.
We’ve talked a lot over the past month about liquidity warning us to be taking profits on long positions as the stock market climbed higher. That message has not changed at all.
We’ve also discussed how a “perfect storm” is setting up for a volatility event that will shock the market from its current extremely complacent state and cause an enormous spike higher in volatility and an accompanying steep drop in stock prices. Read here for details.
Another concerning development is that insider selling, i.e., corporate officers and directors, people in decision making positions in public companies, are selling stock at a very high ratio as compared to buyers. According to Thompson Reuters the ratio of insider sales to buys currently stands at 59, meaning for every insider buyer there are 59 sellers. Readings under 12 to 1 are considered bullish for higher stock prices, while readings over 20 to 1 are considered bearish for stocks. Bottom line: public company insiders are selling at a very high rate compared to buying during this rally.
Here’s an updated Fibonacci retracement price target chart for the S&P500 Index Futures from the Summer high to the election night low. The most important question to ask: Is the breakout higher in price for real, or a “pop and drop” setting up? Considering the messages from liquidity, volatility and now the extremely high corporate insider sellers to buyers ratio, we think the answer is SELL HIGH!
If you would like to review the EquitySurge™ trading signals generated in 2016 and so far in 2017 please see the Trading Signal Performance Chart page.