Technical Amber Lights

BarroMetrics Views: Technical Amber Lights

Technical  amber lights are flashing that some sort of top is forming in US stocks:

  1. The Volume-Range swing relationship suggests a buying climax took place last week.
  2. Last week we saw a Key Reversal week (where we see a close below the low of at least 2 weeks after we see a 52-week high; and that high is within 3 weeks of the low close).
  3. The Dumb-Smart indicator from Sentimentrader is at levels that mark tops.

But all this will be for naught if the FED does not taper on Wed 2:00 PM, EST. And, I don’t tapering will on Wed:

  1. We saw the FED take preventive measures after the Non-Farm Payrolls number. There seems little point in intervening on Non-Farm Payrolls, and then let that effort go to waste – by tapering shortly after.
  2. The US debt ceiling issue has been postponed to at least Jan 15 and possibly Feb 7. I can’t see the FED tapering before then.

If I am wrong, and the FED tapers, then we can expect to see a strong sell-off. Perhaps not on Wed – nothing preventing the FED from again supporting the market following their decision – but certainly shortly thereafter.

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