As of Friday, February 10, 2017 at the close of trading EquitySurge™ has continued a strong sell signal for USA equities.
More new all-time-highs on all the major indexes, including the NYSE Composite! Phenomenal… until you look under the hood.
We’ve been talking for a long time now about all the signs that this post-election rally is running out of steam and how dangerous it is to remain long equities:
- Liquidity has been telling us to exit longs into the rally for 2 months now.
- There is a perfect storm setup for a “volatility event” that could spike volatility from current historically low levels and cause a massive drop in stock prices.
- Public company insiders have been selling into this rally at a furious pace.
- Volumes have been declining as prices have climbed. Not just recently, but over the past many weeks.
And now when we take a look at investor sentiment, a measure of how bullish or bearish investors are, we see that current readings are at the 96th percentile of bullish according to Investors Intelligence ! To quote our admired colleague at Pension Partners Michael Gayed, “The point of maximum risk is the point when everyone believes there is no risk. This does not imply an imminent decline. Rather it implies one should manage expectations for what happens next, and plan for alternate scenarios. Don’t get caught up in the euphoria of higher prices. Get excited for lower ones.”
As we’ve said many times before, stock market investing is all about Buy Low and Sell High, and to quote legendary investor Warren Buffett one more time, “Be fearful when others are greedy, and greedy when others are fearful.”
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.