Climax Continues

Short-Term:

Last week we saw a more climatic behavior, we likely see type of behavior continue over the next few weeks in between abrupt pullbacks. We have a target just above at 257 which has a high probability of being hit.

Statistics for 4 up week on the S&P: 66% chance to close green the following week with a profit factor above 2.

Medium-Term:

As we mentioned last week, we are now in the final climax phase of the long 8 year bull market. This will be the exhaustion phase of the Bull move. While this phase could continue for some time, chances are the upside is limited to around the 260-270 level in the medium term, but with a such a climax rationally goes out the window.

SPY has now risen for 11 months is a row which breaks the previous record. We are now seeing volume indicators spike higher while at the same time momentum is clearly weakening. This type of divergence should lead to a sharp 1-3 month pullback which can start at any time over the next few months. The 240 level would be the first line in the sand. However, Bulls will likely buy the first pullback so Bulls are in full control.

More evidence of a climax can be seen with SPY being above its moving average (the blue line) for 46 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 very rare territory.

 

Long-Term:

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

Starting in October 2017 the Fed will begin to shed its balance sheet which should prove to be a problem later in 2018.

Here is the Full Plan.

The Calendar:

This week: We will have the Fed Minutes along with a bunch of Fed speakers.

Next Week: We will see Yellen speak on Friday.

Trend Following Models:

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

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