It Has Been 2 1/2 Months Since Exodus’ Last Oversold Signal; A Reckoning is Coming

The last time Exodus flagged oversold was on March the 23rd, 2016. Although rare, I do believe the algorithms are behaving as they should. Markets have, for the most part, done nothing for the past month or so. We’ve seen some weakness in multiple sectors, but not anything that is overly concerning.

But if there’s one thing that I’ve learned since creating this amazing market tool is to be wary of periods of calm, for they always lead to tumult. Over the past two weeks, the algorithms have pointed to overbought conditions in both semis and Asian equities. Today, they are saying to short Brazil and to go short the British pound.

Markets tried to rally today, but the heft and the weight of the selling was a burden too much to bear. With shares of Apple and Google in the penalty box and a sundry of near term events that pose a threat to market stability, investors opted out of today’s rat race.

The bull case, of course, lies with a rejection of the BREXIT referendum, which should spur a feverish rally in European banks. That rally should spill over into our markets and a short squeeze might occur. But the overall sentiment that negative rates have imprinted on markets is one that will not be lifted any time soon. I am somewhat sanguine on the new Fed position, backing away from hiking. However, the way those lunatics talk, at the first sign of economic stability or growth, they might resume the ‘live meeting’ and ‘three more hikes for ’16’ jargon again.

Who knows?

In a world filled with smoke and mirrors and clowns running about splashing cream pies into the faces of investors, this much is, indelibly, clear.

We are entering a period of stagnation. Earnings growth is nil to negative. Valuations are excessive. The main source of liquidity is provided by central banks. Eventually, the fundamentals will matter. Either productivity is set to explode and valuations will grow into their oversized boots, or a lot of jobs are about to be lost and GDP estimates are about to coming tumbling down.

NOTE: Big news coming to members of 12631 soon. Stay tuned.

The post It Has Been 2 1/2 Months Since Exodus’ Last Oversold Signal; A Reckoning is Coming appeared first on Trading with The Fly.

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