S&P 500 Painting Extreme Trend Strength Warning on the Weekly Chart …

The weekly SPX chart is painting a dark blue candle this week that signifies that the trend strength histogram has pushed above the 100 level and is therefore now in the “extreme” trend strength warning zone …

This is a big deal on a weekly chart – the last time the weekly SPX did this was in July 1995, which was about 6 months into the multi-year internet/tech craze.  There are lots of extreme trend strength warnings on moves lower, primarily because declines are more emotional than grinds higher in the market.

S&P 500 Index – Weekly Chart

So what does all this mean?  Has the S&P 500 just broken out higher out of a trading range and about to go on a 5-year rocket ship ride higher like the craze we saw back during the 1995 – 2000 time period?  Maybe, but I would argue that we are not just breaking out of a trading range here in late 2017.

I heard on CNBC this morning that the DJIA is on the way to finishing the current calendar quarter and register the largest quarterly gain ever in % terms as well as in the total points added.  I think also that I recently heard or read that 2017 is going to be the lowest volatility year on record.  All is good right?  Bitcoin is dominating the news, Trump is making American great again, and the new Saudi leaders are bringing back movie theaters to their country.

What could possibly go wrong in 2018?  It has to be a replication of the prior 12 months right?  ……. Right??  This mornings inflation numbers reconfirms that there is no inflation in the US (cough cough … except in financial assets) and therefore, there is a chance that the FOMC’s decision this afternoon is to stay pat, but to warn the markets, that they are data dependent and stand on guard against inflation if it were ever to raise its ugly head again.

My recommendation is for traders to not assume anything and to just stand on guard and watch price action even more closely this coming year.

Cheers … Leaf_West

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