I hope that you are enjoying the stock market rally this week. My inner trader covered his short positions last week and stepped aside to await a better short re-entry point. St. Patrick's Day may be it.
Ryan Detrick pointed out that St. Patrick's Day is one of the most positive days of the year, though as of the time of this writing, the market has been flat.
As well, Rob Hanna at Quantifiable Edges highlighted March option expiry week (OpEx) is one of the most consistently bullish OpEx weeks of the year. As I will show later, OpEx+1 week tends to mean revert and see market weakness.
The latest readings from Index Indicators show that the market is rolling over after flashing a short-term overbought reading.
In addition, a number of broad based indices had violated their uptrends, which is setting up the market up for a period of correction or consolidation.
Risk appetite, as measured by the junk bond market, is flashing a minor negative divergence.
When I put these conditions together with my own study of OpEx week, it adds up to a tactical sell signal on the stock market.
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