Every big shot market timmer from Mr Fade himself, Dennis Gartman, to Tom DeMark, to Nouriel Roubini, Laszlo Birinyi, Doug Kass, and John Hussman have called for a high, or a stock market crash this year, as the S&P on average made new record highs every four days. The S&P went 51 days without a 0.50% fall, its longest since 1965 and its longest streak of not having a 1% drop or rally since 1995. It seems like these well-knowns were not paying attention to the old stock market adage… The trend is your friend. Yesterday the Dow and S&P made new all-time highs, and the Nasdaq passed through 7,000 for the first time. One of the hardest things to do is pick tops, and that clearly was the lesson in 2017.
PPT Cut Backs
The rally has not just been in the U.S. it’s been around the world, and it’s been backed by all the bond buying / quantitative easing. As the world’s central banks cut back and start a raise interest rates the PPT (plunge protection team) will not be be lending the unending liquidity that has supported the markets for the last several years. When this happens there will be an upswing in volatility. MrTopStep is not forecasting a crash, and while we still think the S&P has more upside, we also think there will be some sizable down drafts. As the fed continues to raise interest rates we do not think its out of the ballpark to see a down 5% day in the Nasdaq, or a 3% drop in the Dow and S&P in one day. But we also think the ‘dip buyers’ will continue to buy stocks when the markets do sell off / pullback. The conclusion is that 2018 is not going to be like 2017. Will the ES trade 2900.00 like the UBS forecast? We think so, but not without some shake and bakes along the way. Will the VIX start going up? We seriously think so…
Just Another Day At The Beach; Dow Post’s 70th Record Close In 2017
It was a quiet day with a very narrow trading range. The ES got a little weak late in the day when the MiM started to show ‘size for sale’. The ES did what it always does when the MiM is big to sell, it sold off and then rallied, but there just was not a lot of trade. In the end the S&P 500 futures (ESH18:CME) settled at , up handles, or %; the Dow Jones futures (YMH18:CBT) settled at , up points, or %; the Nasdaq 100 futures (NQH18:CME) settled at , up points, or %; and the Russell 2000 (RTYH18:CME) settled at , up points or % on the day.
As always, please use protective buy and sell stops when trading futures and options.