As I indicated last year, the market will likely show signs of weakness during the February to May time-frame. With this in mind, I began looking for a weekly RSI divergence on the S&P. Well last week, this negative divergence "carved" itself onto the charts. If it were closer to February, my inclination would be to sell 100% of my core equity position as my strategy would dictate. However, I couldn't totally ignore the fact that February is just around the corner and a negative divergence is in place. Thus, I assessed my short-term options model and learned that a sell signal would likely "fire" today. With these factors in mind, I decided to sell 50% of my equity holdings and take a nice profit from last year's run up.
As we get closer to February, I'll be looking for confirmation of a top and if necessary, identify other selling opportunities. Please note that because I do not foresee a protracted decline, I will not be going short anytime soon. I'll be updating the sidebar for the blog to reflect my 2014 predictions.
Follow signals from the Prophet4Traders system to identify turning points in the U.S. stock market
The purpose of this site is to share results of a trading system that I use for identifying both long-term and short-term trading opportunities. I take the time to do this because of my passion for investing and helping others succeed. The system helped me avoid the "Crash of 2007/2008" and every major correction since then. The cornerstone of my trading system are analyses of market liquidity to gauge longer-term market sentiment and equity and index options (put/call ratios) to identify short-term entry and exits.
This site is for information purposes only. Past performance of the trading system is not a guarantee of its future success. Please consider consulting a qualified investment adviser before making investment decisions.