UPDATE: Same theme for the last five weeks- Move up the trailing protective profit sell stop as bullish price action continues to dictate the overall profile of the Index.
Last week, we also stated, “Keep in mind the bullish cycle of this move could wane toward 1825.00. The upside is limited at this juncture”. Since moving to the Strong Buy at 1,683 on the S&P 500, we said a move to 1,825 was likely. We would reduce exposure at either 1,825 or an overbought level. These are not bearish sells, just proactive risk management. Remember, we are not trying to call market tops or bottoms, we are just trying to proactively manage risk. For those of you who have been with us for the entire 2013, we have caught almost 400 S&P 500 points and we are going to defend this gain even if we have not hit the official overbought level.
For the week ahead move the pivot up to 1802.00 from last week’s level of 1788.00. Therefore, only sell on a close below 1802.00.
Take note the Index reversed 8 points from the historical high on Friday to close near the session low.
Additionally, the S&P 500 is almost overbought and at this juncture we are splitting hairs. We use a -74 reading on the counter trend as an overbought level on the S&P 500. As of Friday the counter trend read -65, so we don’t have too much more to go. Note: for those who are using PROPlus we will be adding the historical counter trend readings, this will be a good tool for greater insight into how a specific stock or market reacts to overbought and oversold levels.