Navigator Algorithms – 100% Cash
What may be good for coffee is not always good for the markets. We squeezed another 40 points or so on this last round trip on the S&P 500 index, and we are off to a great start for the year. But as I have been mentioning, we are stuck in the corner of a rising wedge pattern.
Unless the market goes completely vertical (and nothing would surprise me at this point), I don’t think we can squeeze another drop out of the market without waking up one morning very unhappy. This morning would have been a case in point. We were out yesterday at 3851.50 for a 39 point gain. The S&P 500 futures are down about 52 points from our exit at this writing.
In addition to the Navigator exit signal yesterday, the charts below (courtesy of David Larew – Twitter Handle @thinktankcharts) illustrate the point:
Valuations remain lofty. The earnings momentum we expect into year-end will help right the apple cart, but it does not hurt to briefly revisit the issue:
The momentum divergences I mentioned yesterday can be seen in this chart:
Breadth divergences are also making an appearance at this last high as can be seen below:
The sentiment still indicates a generally giddy crowd, and most of the crowd are retail amateurs. Truly, the market is a zero-sum game. We just took 40 points from someone:
This is not my first bull market, but these are the lowest levels I have seen in the put/call ratio in my 34-year career:
You know the old saying: “pigs get fat, and hogs get slaughtered.” The S&P 500 futures are back to the daily mean this morning – let’s see what happens.
As a side note, President Biden joined Grammarly’s view and signed an executive order outlawing the term “China Virus” yesterday, at least in the federal government. So if I use the term “Covid-19,” you will know why. Would someone please pinch me and wake me up?
A.F. Thornton