S&P500: Ignore The Bearish Commentary

December 31, 2017

New York (Dec 31)  The S&P500 (NYSE:SPX) looks like it is going to return just under 20% for the 2017 calendar year. With the market at all time highs, the end of the year (when portfolio managers and the like usually are tidying up their accounts) seems to be the opportune time for bearish commentary to circulate. We have been long the market for quite a while now and I don't see any compelling reason to be either shorting this market or on the sidelines. Of course the top will one day come but don't let any invested interest detract you from what has been a spectacular trade for the best part of 9 years now.

Staying with a proven trend can be very difficult for traders especially due to the perceived risk of losing those paper profits. However we have decided to ignore wiggles for quite a while now due to our signals still very much showing that higher prices still remain ahead of us. As we enter 2018, here are the main areas we will be watching for a cyclical top.

First of all, we watch the Commitment of Traders report which comes out every week. In the most recent report, we actually saw a net short number of 3,149 contracts (see below). This resulted in a blees rating of 51. Why is this significant you may be asking? Well for a cyclical top to occur, we need everyone on the same side of the boat. We need the short traders to convert to longs which would mean a bless rating pinned at 90 or above for weeks on end ( similar to what we saw in mid to late 2007). We just are not anywhere near these conditions as of yet.


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