posted on 16 January 2017
From a purely technical standpoint, there are a couple of things investors should be aware of as we head into this week.
This Is Interesting
I want to repeat this little blurb from Tuesday, only because it ties into last weekend’s newsletter as well.
Click on any chart below for larger image.
As I noted above, when “extremes become the norm" that is the point in time where “danger lurks."
Back to Technical Review
First, as noted on Friday by Bespoke Investments (click on image for live tweet at Twitter)
In addition Bespoke says this is the 28th longest steak since 1928.
Not surprisingly, given the period of advance without a 1% decline, which has pushed prices to an extreme deviation above the 200-dma, the volatility index has dropped to levels that have historically denoted short to intermediate-term market peaks.
On a very short-term, daily, basis, the market registered a “sell-signal" from a very high level, something I discussed several times previously. While such a sell-signal does not always translate IMMEDIATELY into a correctional process, it has done so, particularly from these levels, more often than not.
This suggests that profit taking is still advisable until a new “buy signal" is registered.
With Trump’s inauguration next week, and an immediate flurry of action promised within the first 100-days, there is a significant degree of risk that an action, combined with extremes of the market as discussed above, could send market participants running for cover.
Some caution is advised until there is better clarity on a risk/reward basis.
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