As some of you know that I trade emails with, I have been saying that I think we will get a bounce at the beginning of March. Here you can see the seasonal pattern that has been pretty reliable in recent years.
It is accompanied by a huge amount of divergence in the Pro Go oscillator, which is one of the best accumulation/distribution indicators out there. Ideally we would be undervalued and sentiment would be bearish, neither of those two conditions exist. In fact sentiment is actually pretty bullish the way I measure it, which is bearish for the market. As a result this is far from a perfect setup.
One of my mentors Larry Williams has called for a sharp rally to start about now due to a valuation model that he has that measure bond yields against stock yields. I do not use that but it is a nice tool. When I take all of this into account what I come up with is that I think we will get a rally here possibly into May which if we do could set up a tremendous shorting opportunity. For those of you that have not bailed out of retirement equity positions, this could provide a chance to switch into cash in those accounts.
I will post at some point in the future, where I think we are going bigger picture, which is much lower. However, there is plenty of time for that for now I think we are close to a decent bounce.