As you can see on the chart, in May of 2007, the separation of the 3EMA over the 9EMA was 4.3%, but in October of 2007, when $SPX closed at a new high, the separation was only 2.9%. This showed a loss of momentum which, when coupled with negative divergences in the and the , strongly suggested that the $SPX was nearing a top of some kind. By the end of November of 2007, the had produced a failure swing and the dropped below 100 and the rest is history.
This same type of chart set up with divergences in & occurred in August of 2000 when $SPX made a new closing high in the monthly time coupled with negative divergences in & . In September, with $SPX down 85pts, the fell below +100 confirming that sell signal.
I'm not trying to call a top here, nor do I know what the current divergences and loss of momentum mean in today's context because back in 2000 and 2007 we didn't have all the HFT's running the show. It's very possible that the markets will ignore all this and just head north and so on, and so on. Regardless of whether or not anything comes of the warning the current situation implies, it's still a warning until proven otherwise, IMHO, of course.
Interesting chart here: http://stks.co/t030O
GL in the week ahead.
Lastly, when I see the frothy near-term top signs and will add a hedge (SPXS) to buffer the fall. Unless precipitating events occur, I would expect the lower channel (by end of March) near 1770 to hold. If Ukraine gets out of control, that could cause a breach. I expect to hear all the weak economic data that has been ignored to come back into focus in the next couple weeks creating the mini-correction trigger. I am watching for a potential upper channel crawl like we saw the end of December. If this occurs, it could continue for a few weeks rather than an abrupt market turn. Overall, I'm expecting 4 mini-corrections this year. We had 2 (9%) in 2012, and 3 (5-7%) in 2013. I expect more volatility especially since 2013 ended at multi-year upper channel.
Regards - Glenn