As of Thursday, June 1, 2017 at the close of trading EquitySurge™ has continued a strong sell signal for USA equities.
Stocks staged a strong reversal higher following the mid-May sell-off, and have now reached our alternative topping target at the 2430 level on the S&P500 Index Futures, which is the 261.8% Fibonacci Retracement from last Summer’s high to the election night low.
We cannot stress enough how important it is that the futures have reached this Fibonacci target, especially so since it’s been hit on numerous negative technical divergences.
The charts below show the precision with which the market trades around these Fibonacci levels, even over time frames spanning many months. The fact that the 261.8% retracement level is being reached on weak and negatively diverging technicals is a very strong warning about what may lie ahead for equities.
Yes, we have been on a strong sell signal since late in 2016, and since then we have suggested that investors take profits on long positions by selling into the rising prices. But at this Fibonacci target is hit with divergent technicals, the importance of taking action is more critical than ever.
The object of equity investing is to buy low and sell high. We led you into long positions in stocks at the major lows established in January-February, 2016, and since that time stocks have climbed strongly into our initial sell signal back in December of 2016. Yes, the rally has continued well beyond our initial signal to sell, but the additional move higher has come along with diverging technicals, and in addition, the strong growth leadership groups that led initially after the election, namely banks, small cap stocks, high beta (high growth) stocks have all reversed those gains and gone flat to down year-to-date in 2017. What then is holding up stocks at these price levels now? A narrow group of large-cap technology stocks.
Take a look at the charts below and make your own mind up as to whether you want to continue holding equities in this environment and at these price levels. It is our belief that at best a much better buying opportunity is coming, i.e. significantly lower prices, or perhaps something much worse.
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.