We’ve arrived at a significant crossroads in equities. One that must be addressed heading into May.
I’ve saved any top calling efforts for the professionals on StockTwits. However, one metric I’ve always used in this process is market speed and overall volatility.
Here are two things you need to consider, as “market speed” is at a critical juncture.
I’ve always used the ATR on the indices to determine what is normal/abnormal volatility. Anything under 20 in the SPX is normal speed. Anything above is a precursor to market weakness. Volatility at market highs suggests changes in trend are on the horizon.
With the old adage, “Sell in May and Go Away” if there is no selling this upcoming week, this market will rally for no less than 8 months from here. However, a little selling next week might be the trigger or start of a decent move lower.
This image shows where a spike above 20 in ATR has marked tops.
This image shows where a breakdown in ATR has set off a prolonged market rally.
Just focus on the detail of where the daily ATR is in reference to this 20 level. My original call that I’ve stuck to for years is that we need that last melt-up phase, and I’ve never swayed from that. Next week and into May is my confirmation of this move.
Consider a hedge, just in case.