As of Friday, May 12, 2017 at the close of trading EquitySurge™ has continued a strong sell signal for USA equities.
With the markets moving as slowly as they are, we’ve decided to make weekly posts on Fridays as opposed to updating every day, until something happens to shake these markets around, which we think is imminently looming.
The double-top we’ve been talking about for many weeks now has printed as of May 8, 2017 when the S&P500 Index Futures made a higher high at 2403.75 as compared to March 1, 2017 at 2397.75, but on seriously negatively diverged technicals. The charts below show the double-top and the divergences.
While there still is a chance that another higher high could be made at or near the 2430 level, which is the 261.8% Fibonacci Retracement from the Summer high to the election night low, the odds of that happening are dropping.
We have been bearish since last December 7th, but the S&P500 Index has climbed since then, so we’ve missed the rally in the interim. But we’ve been bearish for many reasons, not the least of which is that this rally since then has occurred on highly questionable technical indications, which have now become quite serious.
Divergences in the stock market nearly always get reconciled, and the negative divergences occurring as prices have been rising since the election are pretty unprecedented.
Looking at a weekly chart of the Futures, we see that volume has been flowing OUT since the middle of 2014! The area of the last high volume inflow level is around the 2000 level, which also happens to be the election night plunge low on the Futures…
If you have not taken profits on your longs during the last several months rally higher in stock prices, we urge you to do so now, as these negative divergences cannot go on much longer before the stretched rubber band breaks and stock prices correct violently lower.
See the charts below for more details:
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.