Last week went precisely as we had anticipated. We saw a small pullback followed by a new high later in the week. Friday was an outside bar which could spell some trouble for Bulls over the next few weeks. This is further confirmation that The Bulls are becoming weaker. This week will be all about the FED. Currently, there is a 99% chance of another rate hike. In the mean time, we do think we will see another push higher by the Bulls. If The Bears can once again stop this push, then they will start to take back control.
Statistics for 1 down week on the S&P: next week historically, has a 59% chance to close in the green, with a decent profit factor.
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 currency on the course to 248 target. As we stated over the last few weeks: such a run will increase the chance of an abrupt pullback with little or no warning. This is because we are entering thin air, with the market very over extend. Also, the lack of broad rally and weaker momentum further increases the potential.
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.
Also of note, SPY has been above its moving average (the blue line) for 29 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 Market Outlook (Updated 4/16/17).
This week is all about the FED. Currently, there is a 99% chance of a hike on Wednesday.
Next week we will see new housing data and some Fed speakers.
Trend Following Models:
Our long-term models are Bullish.
Our medium-term models are Bullish.
Our short-term models are Neutral.