Market technicals are extreme and point towards a top – Hedge Fund Telemetry

via hedgefundtelemetry:

The global equity markets continue higher today on “trade optimism” once again. Equity bullish sentiment has been extreme on the upside and several secondary DeMark Countdown exhaustion signals have recycled and/or have secondary Countdowns triggering 13’s or are quite close. There’s some internals like very low put-call ratios, volume, lack of new 52 week highs, and the McClellan’s Advance-Decline indicator in the negative. I’ve seen this occur in the past and each time it’s very late in an upside move.

Some of the negative catalysts that I listed out a little while back are starting to become clearly less relevant as a risk. The US-China trade war is likely going to end with “Phase 1” and a tariff lift. Brexit risks have been mitigated. Some US Europe auto tariffs look also to be postponed. Q3 earnings were fine and a little better on EPS and inline to slightly better on revenues. A lot of thanks to the continued buyback bid and the Fed’s sudden urgency to not only cut rates at all-time highs but the addition of “Not QE” billions each month.

As I write this I’m listening to President Trump taking the victory lap of TREMENDOUS VICTORY LAPS. Markets have always topped with this type of backdrop of overconfidence and “good news.” With all of the overbought and overloved indicators, the potential for a reversal is highly probable on the smallest of catalysts just back last December when I showed everything was skewed on the opposite side with bullish sentiment under 5% bulls and every indicator oversold and this is when people were panicking. It only took a little comment by Powell to sharply reverse higher.

I’m asked a lot what the catalyst will be and I can’t pinpoint what it will be but perhaps it will be just due to the last buyer buying. Stay defensive as you don’t need to chase this market. No changes to Trade Ideas sheet today. I’ll have some things tomorrow I’m working on.