Wednesday-Thursday, February 22-23, 2017

As of Thursday, February 23, 2017 at the close of trading EquitySurge™ has continued a strong sell signal for USA equities.

We didn’t publish an update yesterday because after all it would have just been the same recent story in one more iteration: new all-time-highs in super light, narrow-range trading with continuing weak market internals and technicals, blah, blah, blah.

However today, Thursday, things are different. The market opened on a big gap-up but then quickly sold off hard down about 14 points on the S&P500 Index, before recovering about half that over the rest of the day and into the close. That is indeed different action than we’ve been seeing for a long time, and worth noting.

In addition, today marks the sixth straight daily increase in price for the volatility ETN, VXX, again a very different phenomenon from what’s been happening.

Long term USA Treasury bonds are also continuing a recent uptrend that has pushed bond prices up and yields down.

Of particular note in bonds today is the hard downtrend in yields for two-year sovereign German government bonds, which are now yielding negative .88 percent, a new record low yield! According to our colleague Bryan Rich at Logic Fund Management, “You pay almost 1% now to loan the German government money for two years.” Here’s a chart of the German 2-year note yield from Bryan for perspective:

german-2-year-yield-as-of-02232017

We’ve been harping for a long time now that you should be selling your equity holdings into this rally. We’ve cited warnings from liquidity, severely weakening market internals and technicals, a perfect storm set-up for a massive spike in volatility to happen at anytime, and now to add to all of that, we are seeing the shift from risk-on into equities to risk-off into government bonds starting to happen with earnest.

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.

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