Please do not buy into the hype in the mainstream financial media that we are set for a great EOY rally. I know channels like CNBC like to have guests on that say that, but look at what these guests are actually doing with their money.

Equity Put Call Ratio chart shows PUT buying over CALL buying

I’m being a little unfair towards the mainstream media. I have no idea if the guests on CNBC are actually telling you to go long while they secretly increase put positions against those longs. But whatever. We do know that put buying is outpacing call buying as institutional traders and hedge funds are increasingly taking short bets against markets. Worse, check out the daily chart of the S&P 500 today.

SPX rolling over with a doji candlestick

We have a doji candlestick right below the 200 day moving average resistance and the upper downtrend channel wall. As we touch these major resistance levels, it’s important to see what Bulls are doing and clearly, they’re un-enthusiastic about buying here. The last time we had a doji off downtrend channel resistance, the S&P 500 fell almost 200 points.

Finally, looking at the 14 day moving average of buy volume versus sell volume on the S&P 500, sell volume is still outpacing buy volume! In fact, the 14 day moving average on volume shows that buy volume is at 0.47 billion while sell volume is at a whopping 1.42 billion! Folks, volume is telling us the real story here which is that it’s much too early to be gambling on an end of year rally just because Powell said yesterday that he thinks interest rates are just below the neutral rate. Yes, if the Fed doesn’t hike in December this market will explode higher. Yes, if he pauses hikes in 2019, the market will go higher. However, until Powell actually takes action and puts interest rate policy where his mouth is, it’s nothing but cheap talk. Let’s continue to stay mostly in cash until buy side volume overtakes sell side volume.

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