BarroMetrics Views: Technical Amber Lights
Technical amber lights are flashing that some sort of top is forming in US stocks:
- The Volume-Range swing relationship suggests a buying climax took place last week.
- 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).
- 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:
- 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.
- 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.