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US Equity Market Outlook (video & static charts)

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

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

$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

$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

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

$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.

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Feb 28, 2016 8:26pm|Categories: Equity Market Analysis|Tags: , , , , , |9 Comments

9 Comments

  1. Kstellish February 28, 2016 11:19 pm at 11:19 pm

    Awesome work Randy! I really appreciate the attention to detail.

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  2. covey February 28, 2016 11:41 pm at 11:41 pm

    Excellent video, Randy. Thank you for taking the time to share your analysis and thoughts.

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    • Shambo February 29, 2016 8:10 am at 8:10 am

      Thanks Randy, great video.

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  3. dmel February 29, 2016 7:15 am at 7:15 am

    great stuff,Randy

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  4. dan123 February 29, 2016 11:51 am at 11:51 am

    Great work Randy. Thank you for sharing your thoughts on the market

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  5. Franklin4 February 29, 2016 12:49 pm at 12:49 pm

    Have a look at that APPL chart and tell me it doesn’t look primed to lead the markets into short squeeze rally territory. No way they’d make it as easy as reversing off the 200 average.

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  6. rsotc February 29, 2016 1:36 pm at 1:36 pm

    @franklin4 Maybe so although I will add that one of the reasons that I’ve held off adding back any short exposure on the broad market for weeks now is that AAPL has successfully defended the key 93ish support level on numerous occasions recently (where the last two long trades were taken). If/when that level is clearly taken out by AAPL, there’s a decent chance that it will drag the rest of the market down with it. Although I’ve posted two successful long trades in AAPL over the last 5 or so weeks (links below), I don’t care to go long again even if the stock can pop above the 99 level (next resistance) and start to rally as I only see about 10% upside potential as the most bullish “likely” scenario but quite a bit more downside should the market suddenly reverse.

    AAPL official trade idea long entry from Jan 20th at 93.56: http://rightsideofthechart.com/long-aapl/
    Price target hit for a 2-day gain of 7.4%: http://rightsideofthechart.com/aapl-price-target-hit-next-unofficial-price-target-is-104-95/

    AAPL unofficial long trade entry from Feb 11th at 93.00: http://rightsideofthechart.com/members/rsotc/activity/2491/?no_frame=1
    First profit target hit, booked 1/2 profits letting the remainder ride to the 100 area: http://rightsideofthechart.com/members/rsotc/activity/2641/

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    • Franklin4 February 29, 2016 4:06 pm at 4:06 pm

      I’d say it’s fairly certain AAPL will break through and head lower eventually, but it looks so round and basey here. And, as I’m sure you’ve noticed, AAPL tends to be the go to stock when they’re looking to push the markets around from key point to point. That and, in other news, TSLA recently ran out of shares to short, so a nice little pop over $200 might be on the horizon regardless of today’s shaky candle. I guess my point is that I, personally, wouldn’t crap my pants to see this run extend to new ATH’s… I might soil them a little, but that would likely be the extent of future underwear damage I’m looking at due to shock, and as I’ve got some stock in HBI I’m not really too concerned.

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