We saw a few more speed bumps last week as well as some capitulation. We are also at just extreme, never before seen overbought levels on various indicators. This leads us to believe we should see some type of 2-3 day pullback start by the end of this week or very early next week. However another new all time high is likely. The first target would be the 284 level.

Statistics for 4 up week on the S&P: 67% chance of closing green but with a good profit factor.



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, but with a such a climax rationally goes out the window. Also, of note is that there is a long standing trend line dating back to the 2009 low above at this same 260-270 level. Since we have broken this trend line, it further increases the change a large, abrupt pullback back to this level. While the chances of such a sudden “crash” remain low by definition, they are slowly increasing.

We think a larger pullback in imminent with the debt ceiling debate coming up in mid February and many of the market catalysts are now priced into the market.

SPY has now risen for 14 months is a row which breaks the previous record, which is another sign of the current climatic market phase. Internals are now at extremes as well, this suggests that we should see a sharp pullback at some point when the blow off completes. If January closes on near the high, the Monthly bar will look like a textbook blow off top. This should normally lead to a 1-4 month pause or pullback. The 270 level would be the first line in the sand. However, Bulls will likely buy the first larger pullback so Bulls continue to be in full control for the foreseeable future.

Even more evidence of the current climax can be seen with SPY being above its moving average (the blue line) for 62 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 in the history of the S&P! So we are clearly witnessing a once in a lifetime type of bull move.


Long-Term Market Outlook (Updated 11/5/17).

The Calendar: We will have the FOMC (The funds rate is not expected to change) and the Jobs report.

Next Week: will be rather quite but we will start to see rumblings about the debt debate.

Trend Following Models:

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