As this video for the near-term & longer-term outlook for the US equity markets is quite lengthy, here’s a brief summary of what was discussed:
The video begins with a discussion of various trend indicators used to define by the long-term (primary) trend, which remains clearly bearish at this time, as well as the shorter-term trends, all of which are currently bullish, indicating that the current rally could have more room to run.
Quad Trend Indicators Feb 28th
Next, two recent but conflicting technical developments paint a mixed picture of where the markets are headed next. One of the reason that I’ve remained bullish over the last several weeks was the fact that the major equity indices put in a divergent low on the daily time frame with the Feb 11th lows. As expected, those divergences played out for a nice rally so far and could easily continue to play out with more upside in stock prices in the next week or so.
$SPX daily Feb 28th
One potentially bearish development that could put a stop to the recent rally is the fact that nearly all major stock indices are poised to confirm a divergent high, should stocks move considerable lower tomorrow or early next week.
$SPX 60 minute Feb 28th
The video wraps up with a detailed discussion of three key sentiment indicators that have all recently hit bearish extremes that have historically preceded substantial rallies in the stock market. The last time that short-interest in QQQ hit such levels, the Q’s sparked a near-vertical rally of 17% just two weeks later.
QQQ short interest Feb 28th
As recently pointed out in the $CPC (Total Put/Call Ratio Index), historically in both bull and bear markets alike, when the $CPC has hit extreme readings of 1.49 or higher due to excessive bearishness/put buying, substantial rallies have followed, starting with an initial “mini-rally” followed by a marginal new low a few weeks later and a more substantial & lasting rally.
$CPC daily Feb 28th
The final part of the video goes into what has probably been one of the most reliable set of buy & sell signals from a contrarian perspective; extreme readings in the AAII sentiment surveys. My methodology & the history of using those readings to identify major rallies and corrections in the markets can be view in the last segment of the video below.