As of Thursday, February 16, 2017 at the close of trading EquitySurge™ has continued a strong sell signal for USA equities.
Today the S&P500 Index sold off from the open, then consolidated during much of the trading day, before closing down 2 points at 2347.
There has been talk circulating in the trading community recently that a futures mutual fund is in trouble due to a very large (rumor has it around $17 billion) short options spread position against the S&P500 Index, and has been forced to cover that short position by taking larger and larger long positions in the index.
Indeed the chart below shows the price drop on the fund recently:
Speculation is that the recent non-stop buying in the S&P500 Index can be attributed to this fund unwinding short positions which also has caused other positions to have to be unwound as well, driving more and more buying in the index. According to various news reports on CNBC today that unwinding is complete now. We’ll see.
In addition the VIX Volatility Index has now had the largest two-day move higher since the election.
Is trouble brewing? We think so, and whatever the eventual catalyst will be, the warning signs to get out of long equity positions have been flashing red for some time now.
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.