SPY: Bearish Chart Indicators Show a ~4% Pullback Feb-March 2018
Another attempt at a call, since my last Bitcoin bearish call to short (or at least not buy) at the end of December 2017 came correct (See My Last "Idea" Below). This time, I've been slowly looking back at a historical analysis in 2017 (and even beyond) of times that the bullish market had very bearish indicators flashing. Earlier this year in April 2017 and October 2017, when the SPY Relative Strength Index (RSI) and Commodity Channel Index (CCI) were all way overbought & started to correct AND simultaneously the MACD indicator crossed over from positive to negative, there was a short-term correction. Each and every time! There are multiple examples if you look back historically that this has happened when the confluence of RSI/CCI Overbought => Correction AND MACD Crossover have led to a selloff (e.g. July 2015, September 2015, December 2015, etc.). Notably, though, the large sell-offs in SPY during August 2015 and June 2016 were ONLY preceded by a CCI Overbought => Correction AND MACD Crossover without RSI Overbought => Correction, so perhaps not all are needed to signify an extremely bearish trend ahead. And as people will note, some sell-off weren't preceded by ANY of this indicators at all.
These pull-back/dips historically have been anywhere from about ~3-5% range (I think, I didn't actually calculate it out). Given that these 3 indicators (RSI/CCI Overbought => Correction, MACD Crossover) are ALL flashing again in SPY at the end of January 2017, especially after the sell-off of the last 2 days on January 29, 2017 and January 30, 2017, I'm hypothesizing that this is the beginning of AT LEAST a ~3-5% range minor correction/pullback. If there is a confluence of other problems (e.g. negative news, negative tech earnings reports (from AAPL, FB, GOOG, AMZN, etc), rising interest rates, flat yield curve, I believe this could be a much bigger selloff than 5%, and could reach even the 10% LARGER Correction. My belief is that the market is at risk of this for potentially the rest of February 2018 and maybe even into March 2018. The increasing volatility in the VIX after being so flat for so long is also worrisome for a pull-back, in my mind.
I'm therefore taking steps to hedge my market positions, pull-back into mostly cash, and potentially buy some puts/make some short plays against SPY, DIA, QQQ and other indexes that I believe will follow the general market downwards in February and March 2018. Good luck to all, whatever your view is!
(DISCLAIMER: I have recently sold most or all my LT call positions in QQQ, SPY, DIA...after making a large profit from these between 9/2017-1/2018. I may enter a short position against QQQ, SPY, DIA in the near future as well, although I do not have any current positions in them as of yet)
These pull-back/dips historically have been anywhere from about ~3-5% range (I think, I didn't actually calculate it out). Given that these 3 indicators (RSI/CCI Overbought => Correction, MACD Crossover) are ALL flashing again in SPY at the end of January 2017, especially after the sell-off of the last 2 days on January 29, 2017 and January 30, 2017, I'm hypothesizing that this is the beginning of AT LEAST a ~3-5% range minor correction/pullback. If there is a confluence of other problems (e.g. negative news, negative tech earnings reports (from AAPL, FB, GOOG, AMZN, etc), rising interest rates, flat yield curve, I believe this could be a much bigger selloff than 5%, and could reach even the 10% LARGER Correction. My belief is that the market is at risk of this for potentially the rest of February 2018 and maybe even into March 2018. The increasing volatility in the VIX after being so flat for so long is also worrisome for a pull-back, in my mind.
I'm therefore taking steps to hedge my market positions, pull-back into mostly cash, and potentially buy some puts/make some short plays against SPY, DIA, QQQ and other indexes that I believe will follow the general market downwards in February and March 2018. Good luck to all, whatever your view is!
(DISCLAIMER: I have recently sold most or all my LT call positions in QQQ, SPY, DIA...after making a large profit from these between 9/2017-1/2018. I may enter a short position against QQQ, SPY, DIA in the near future as well, although I do not have any current positions in them as of yet)
