*These are my discretionary thoughts on the market. My Medium-Long Term model determines my trades.
Go to the homepage for my latest market outlook. I update this webpage throughout the day.
- Investor sentiment is high. This is not a medium term bearish sign.
- Emerging Markets are very overbought (medium term)
- VIX just hit its all-time bottom again. Is a bounce ahead?
- The NASDAQ is at 7000 (round number resistance).
Also read What happens to the stock market when ISM Manufacturing is very high.
3 pm: Investor sentiment is high. This is not a medium term bearish sign.
The AAII Bulls – Bears spread just exceed 25 for the first time in 3 years.
This seems bearish. It isn’t.
- When AAII peaks, the S&P always gives up any gains in the next few months.
- However, the AAII spread can go a lot higher than where it is now. So we don’t even know if the AAII spread has peaked!
Ignore sentiment when trying to predict medium term tops.
11 am: Emerging Markets are very medium term overbought
EEM is the main emerging markets ETF. It is very overbought on a monthly bar chart.
Is this a bearish medium term sign? No. It’s mostly an irrelevant indicator. EEM’s monthly RSI has already broken above its RSI’s range from 2009-2015. This RSI breakout tell us that EEM’s market stage has changed. It will no longer swing sideways for the long term. Emerging markets have entered into a new bull market, like the one that ended in 2007.
When EEM is in a bull market, its monthly RSI can go much higher over the next few months. Its monthly RSI reached 88 in October 2007. So ignore “overbought” RSI. This isn’t a useful indicator for predicting medium term tops.
6 am: VIX just hit its all-time bottom again. Is a bounce ahead?
VIX has once again hit its all-time bottom. Here’s the monthly bar chart.
VIX is constantly trying to bounce off of this support. Here’s the daily bar chart.
This means that, at the very least, there is a short term bounce ahead for VIX. So perhaps buying VIX calls is a good idea? I don’t know. I don’t trade options.
Buying a VIX etf is not a good idea. These ETFs erode like crazy over the medium term. So you will lose money unless your timing is perfect.
Here’s VXX (1x VIX etf).
Here’s UVXY (2x VIX etf).
6 am: The NASDAQ is at 7000 (round number resistance).
This shouldn’t concern medium-term traders and investors. Round number resistances don’t work well in the stock market. Here’s the NASDAQ’s chart, overlapped with 7000, 6000, 5000, 4000, 3000, and 2000 resistances.
- The NASDAQ did not stop at all at 6000
- The NASDAQ made a significant correction after it reached 5000
- The NASDAQ didn’t stop at all at 4000
- The NASDAQ made a small correction after it reached 3000
- The NASDAQ made a small correction after it reached 2000.
Ignore the NASDAQ’s round # resistances.
Here’s what I think will happen based on my discretionary outlook.
- The S&P will make a small 6%+ “small correction” in Q1 2018. The current rally is the longest one in history without a 6%+ “small correction”.
- 2018 will be much chopper than 2017. If you haven’t already, please read Are financial conditions “too easy”.
I do not use my discretionary outlook to trade. I remain 100% long UPRO because my Medium-Long Term model does not foresee a significant correction at this point in time. I ignore small corrections. I only sidestep significant corrections and bear markets.
I have been 100% long UPRO since September 7, when the S&P was at 2465 and UPRO was at $109.3
*I also have a small Day Trading portfolio. Click here to view my day trades.