Jan 26

Weekend outlook for 28th January 2013 – Let the correction begin!

As i’ve stated past weeks I’m believing that markets is forming a top. However markets has been slowly grinding higher than I expected and this usually happends as it is nearly impossible to call the 100% exact top and 100% exact bottoms. However all the indicators we look at are telling me that markets is topping , even if we moved a bit higher , we should start a correction to the downside.

1. If we look at stocks above MA200 , we are EXTREMELY overbought , never been this overbought before in past years – so something has to give soon. If HISTORY tells us anything it is that a correction is due just according to this indicators.

2. VIX remains extremely low , there is 100% no fear in the markets here when VIX hoovering at 12-13. VIX chart however looks very good as we got a daily chart bullish divergence and late this week VIX started to increase (going green) several days with mkts green, thisi s usually a sign that FEAR is starting to increase and mkts likely to fall.

3. SPX hit on Friday BIG RESISTANCE TRENDLINE from PREVIOUS TOPS LAST YEARS. Will this mean we formed another top? Who knows, its all about odds again, but it suggest that its very likely we formed another top before correction begins.

4. Euro looks like forming one major IHS pattern , with hitting neckline now and a correction in euro could happend , this would mean a correction in markets too.

5. The period in February looks VERY weak to me – I’m expecting February to be a very bad month for stocks.

Conclusion: All in all – I’m thinking that finally the bulls had push the markets high enough , everything points to a pullback correction. If we look at AAII sentiment, we are most bullish in 2 years !! That means sentiment is VERY positive, everyone saying time to buy stocks and safe to buy stocks, retailers joining and everything seems fine. Leaders are calling for crisis over and bla bla bla…… like always…… markets TOPS on good news, and bottoms on HORRIBLE bad news.

Time will tell , but I think the correction will begin starting this week, this is what the indicators and odds are telling me.


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