Monday, June 2, 2014

Just Stretchhhhhhhh....

It's 10.46am, Monday morning on the 2nd of June 2014. Almost half a year has gone by, wow.

Checked-in on the S&P Futures this morning.


Disgusting.

As much as I know that momentum is a legit factor, I have to admit I'm personally more inclined to mean reversion (the variable that you are expecting to mean revert has to be selected very well, if not, it may not revert to the mean!) as well as cycles.

Valuations on the S&P500 is just.... breathtaking.

Monthly? Stretched.
Weekly? Stretched.
Daily? Stretched.
4 Hours? Stretched.
1 Hour? Stretched.
15 Minutes? Stretched.

STRETCHED, ALL STRETCHED.

Sure, no one can call a top. But as far as things go that can possibly look like a top? I think that this looks like a top to me, or very close to it. From a purely statistical point of view, I think odds are highly in favour of a correction. (I haven't hashed out the math yet, don't take my word for it)

Let me list my reasons for the S&P 4H
1) Slow Stoch has been in overbought for ages
2) MACD looks ready to crossover
3) MACD is way above the zero line
4) Upper range of the BB
5) Most stretched from all the moving averages for the longest time ever

This is very similar to the last year late December melt up panic buying. And we know that didn't end too well in January, but it sure killed a lot of shorts because it took out some levered bulls.

Anyway, just ranting. If nobody thinks it's a top, can it a be a top?

I'm short the Russell 2000 now because of the relative weakness. One of these days I'm eventually going to be right. I'm either going to be set back a few months worth of salary and savings, or I'm going to be propelled ahead by a year or two instead.

Good risk-rewards? I think it is.

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