hope you are enjoying the nice weather and even nicer stock market rally of late. It is a bit surprising to see the S&P 500 move to new highs into June but when a bull is charging it is often dangerous to draw lines in the sand. One can often get run over at best and even bankrupt oneself at worst. Regardless, a while ago I published this chart about potential topping zones for the SPY and I thought I would put it out there today once again and do some review.
Three component analysis:
Price: As well as hitting all posted price pattern objectives, we are fast approaching a confluence that is sitting right on a 161% Fib extension level. We are not yet there but as we approach those levels one should take caution.
Volume: Volume/money flow still appears to be healthy and today's higher bar implies the buyers are not done yet.
Momentum: There are underlying signs that momentum is not healthy. At present Willy is rather 'stupid' which implies no new purchases should be considered. Additionally problematic, we have a potential momentum divergence building within the raw .
Put it all together and I would be super-duper reluctant to do any new purchases within the stock market in general until we get at the very least some sort of consolidation.
So with that said, lets review how our two 'camps' ought to be positioned currently:
Traders ought to seriously consider taking at least partial profits on longs established from lower levels at/near the indicated 'topping zone'. Additionally, at present it is way too early to start considering shorts as there simply are no setups to consider.
Investors who took CRI's last S&P Investment Model buy signal (December, 2011) are sitting on monstrous percentage returns and have absolutely no reason to touch those long positions.
Cheers all and hope it helps
You can find the slide show summary of CRI's S&P 500 Model on Google docs here: https://docs.google.com/presentation/d/1mKU7K9OO08qMuzBaVrDvPIKo6pzEIZKNjQ07GVnGlvA/edit?usp=sharing
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