• The rally from the 2009 low is aged
• The risk that price is reaching a Major Top is getting high
• SPX has a potential ending pattern in progress.
• On Friday we had a  reversal candlestick in the Internet ETF (FDN): high beta names like FB, GOOGL, LNKD, TWTR and IWM, while XLE remains weak, but we need to see real weakness in SPX and NDX in order to adopt a bearish stance.
• Breadth is overbought (NYSE Summation Index)

Monthly time frame:

• The month of February ends with an impressive performance
• There is nothing bearish in this time frame
• As long as we don´t have a monthly close below the 10 ma which today stands at 2004 the trend remains firmly up

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• The good news: Most of the major indices have closed on Friday at all time or multi-year highs.
  • SPX has “shored up the structure” of the breakout of the December high. The next resistance is located at the trend line that connects the highs of July-November and December. Next week this trend line will stand at 2132 (21.5 handles above Friday´s eod print)
  • Friday´s candlestick is a Hanging Man. Although a pullback is probable I will not adopt a bearish stance as long as bears are not able to break with authority 2093 (Previous resistance which is now the support)

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IWR: US Real EState ETF

• The large decline (It looks corrective) from the January high could have reached a s/t pause
• There is a potential Falling Wedge. If this ending pattern is correct we could count a Zig Zag (ABC), probably a Double Zig Zag is underway. If this scenario is correct a wave (X) rebound should reach the resistance zone 2 highlighted in the chart below (Provided the assumed bounce does not stall at 80)
• Friday´s Engulfing candlestick is suggesting the bottoming attempt
• Against Friday´s lod (R/R is appealing) today I might go long

Author: Urban Carmel

Every month, we review the latest BAML survey of global fund managers. Among the various ways of measuring investor sentiment, this is one of the better ones as the results reflect how managers are allocated in various asset classes. These managers oversee a combined $700b in assets.

The data should be viewed mostly from a contrarian perspective; that is, when equities fall in price, allocations to cash go higher and allocations to equities go lower as investors become bearish, setting up a buy signal. When prices rise, the opposite occurs, setting up a sell signal.

To this end, fund managers became very bullish in July, September, November and December, and stocks have subsequently sold off each time. Contrariwise, there were some relative bearish extremes reached in August and October to set up new rallies. We did a recap of this pattern in December (post).