Orsley: “Every Time The Market Was This Overbought, A Significant Correction Followed”…(Got The Cold From Hell…)

Thursday, February 14, 2019
By Paul Martin

by Mark Orsley of PrismFP
Thu, 02/14/2019

Potential for a 60-day tariff exemption extension another vol killer
S&P’s hitting a historic extension level that would suggest a correction within the next month
More signs of “Techlash”

With Trump said to be willing to extend the deadline for higher tariffs another 60-days, we are really looking at another two months of compressed volatility for risk assets. Making matters worse is the Fed’s neutral stance which means fixed income volatility will continue to not realize the implieds.

All this has obviously been a boon to the US equity market which continues to benefit from those who are returning to the equity market after the December debacle. Any and all indicators show that positioning is returning to more normal levels and the cash that had been on the sideline being deployed.

So now what? My view has been a near term FOMO rally to 2800 and then we shall reassess. It fits my Elliott Wave count where the 5th and final wave should be completed around there, and it is where the market has roughly failed three times prior since October. Also note in the below chart that you are seeing the MACD indicators narrowing which is a sign of waning momentum, and the RSI now hitting over bought conditions.

Therefore, expect a mind numbing grind to that 2800 region and then let’s see where the fundamentals stand at that point.

I will flash one indicator that jibes with the idea that the parabolic rally off the December crash lows is nearing the final stages. The level of the S&P futures versus its 50-day moving average is severely extended. In fact, over the last 20 years, it has only been this extended twice.

The Rest…HERE

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