Tuesday, February 21, 2017
The rally lives on as the Dow rose another 119 points on average volume. The advance/declines were better than 2 to 1 positive. The summation index continues higher. Overbought to the extreme at this point. Some of the indicators have the highest readings in the past 5 years. That doesn't mean that the rally will end right away but some type of pause is way overdue. As I said before it is probably best to wait for some type of negative divergence on the technical indicators. I am looking at the SPY March puts. Trying to be patient though. GE was up over 1/8 and the volume was a little better. Gold was off just a bit as the US dollar was higher. The XAU and GDX had fractional losses on average volume. I still believe that the fundamentals do not favor gold at this point. Mentally I'm feeling OK. We've rolled into the next option cycle and the market continues to defy gravity. There isn't a lot of economic data out this week. The VIX has been rising and so has the market. That defies the usual logic. What I can say that with the overbought condition that we are seeing today, we're closer to a top than to a bottom. Once again I am hearing the term animal spirits in the financial media. I do not know who makes this stuff up but it is completely ridiculous. There are no sellers. Money continues to pour into stocks. Animal spirits? That is complete fabrication. Do not get sucked into the rally at this point. There will be better entry points down the road in my opinion. For now I'll wait for the negative divergence and try and be patient. Europe and Asia were generally higher last night. We'll keep an eye on things overnight.