Monday, January 8, 2018

SPX and RUT: Near-term Inflection Point

Bears want to know "Are we there yet?"  The problem now is, the beginning of this year has been so strong that it historically suggests the odds are quite good for 2018 to end on a high note.  Of course, history is littered with "broken market rules," which is why brokers love to tell you that Past Performance is No Guarantee of Future Results

Accordingly, I never make decisions or predictions based solely on "historical rules."  But by the same token, we'd be idiots to completely ignore historical signals that seem to point strongly in one direction or other.

From a structural standpoint, SPX has reached at least a near-term inflection point, but one that does not currently lend itself to being predictable.  There is potential for a correction to begin here, but we've been avoiding front-running for a reason, so we'll just have to see how the market reacts next:

RUT may actually be more helpful in terms of pending clues, because it has reached a more clearly-defined inflection point than SPX has:

In conclusion, we've reached at least a near-term inflection point in several markets -- but I'm quite pleased with the results of "not front-running" against a potential extended fifth, and that approach has served us very well.  In fact, the only "top" I've called unequivocally in the past few months was at the beginning of December, on the same day that SPX dropped 45 points in an hour, and I called that top only after we saw our first impulsive leg down.  Thus, we'll continue awaiting a similar setup before getting to married to anything bearish, even over the near term.  Trade safe.

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