Final Flag

Short-Term:

Last week, the breakout was confirmed with the strong close to the week. The target is around 248. This will get us very close to the round 250 number. The rally however, is still not very broad based, which should lead to problems later on (possible final flag pattern).

This week we could see a small pullback early on to relieve some of the overbought conditions but we will likely see a higher high, shortly there after.

Statistics for 2 up weeks on the S&P: 58% chance to close green the following week with a profit factor below 1. Still not good for Bulls.

Medium-Term:

We saw a large move down on May 17th which was quickly bought. This low formed yet another “rare” V bottom. The market has been sucking in short with these quick drop only to quickly squeeze them, forcing the market even higher.

We are now on the course to 250 target. As we stated last week: such a run will increase the chance of an abrupt pullback with little or no warning. This is because we are entering thin air once again, with the market very over extend. Also, the lack of broad rally and weaker momentum further increases the potential.

Just check out the lag in the banking sector.

 

Chances are however, The Bulls have bought themselves some more time since we see no signs of an immediate topping pattern yet. Overall, this could be a final flag breakout which will finally lead to the 5% pullback we have been waiting for over the next couple of months.

As far as Historical periods go: we are now entering the weakest part of the year for the equities market. Hence: “Sell in May and go away”.

Also of note, SPY has been above its moving average (the blue line) for 28 periods. This is extremely unusual and we normally leads to a fall below this average in the near future. This is now the longest period above the average since 2003 (about 50 periods), so we are in very rare territory.

Long-Term:

Long-Term Market Outlook (Updated 4/16/17).

The Calendar:

This week is pretty slow as we gear up for the Fed.

Next week will be all about the FED. Currently there is a 95% chance of a hike.

Trend Following Models:

Our long-term models are Bullish.
Our medium-term models are Neutral.
Our short-term models are Bullish.

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