The S&P 500 has delivered a devilish 2014 performance.
A mini crash followed by a V-shaped recovery in January/February and three false break outs (bull traps) in March/April (see first chart).
View enlarged S&P 500 charts here
The S&P 500 (^GSPC) gave investors plenty of opportunity to buy/sell at the wrong time.
Based on funds flow and sentiment data, the herd did just that.
For example, the April 23 Profit Radar Report published this chart of the CBOE Equity Put/Call ratio, which dropped to 0.528. This meant that option traders bought two calls (bullish bet) for every put (bearish bet).
As the chart shows, this is towards the lower end of the range and the Profit Radar Report warned that: “The up side has been limited at prior such instances,” and continued that: “April/May is generally not a good time to be long, that’s why we are not eager to chase the up side.”
The S&P 500 (SPY) is back below support at 1,874 (green line), but it remains in the 1,815 – 1,890 chop zone. If you don’t want to get hurt, don’t play in the chop zone.
Even more interesting that the S&P 500 is the Nasdaq chart, which sports the early stages of a picture perfect bearish formation and an ideal low-risk setup.
This Nasdaq chart truly says more than a thousand words. It is available here:
PS: This article also includes a link to a 2014 seasonality chart, which suggests that one of those selloffs will stick.
Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.
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