Call me a lunatic … calling a short term market top

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Asianmacro had previously called for a continuous rally in S&P500 when it was at 1880 around May 24 and it has advanced almost 4% since  https://asianmacro.com/2014/05/24/path-of-least-resistance-is-up/. Back in May, many doomsayers were on CNBC and various media calling for an impending collapse of even 10-15% in stocks. But looks like  the shorts and underweights in equities and bonds were all forced to scramble and had to catch up with their benchmarks that they are underperforming against.

However with the impending Full Moon on June 13 and the onset of the FIFA2014 World Cup, I am now calling for caution. Generally, stocks tend to perform better in the days around the New Moon, while price weakness is often seen in the days around Full Moon as seen in the chart above. Many research have touched upon this topic like this here http://papers.ssrn.com/sol3/papers.cfm?abstract_id=281665 and an example of lunar-cycle trading by other traders can be found here http://lunatictrader.com/?Moon_Cycles:Lunar_Phases and http://www.ftsefreedom.com/2012/08/how-moon-affects-trader-sentiment-and.html.

However, another indicator which is the USA Federal Reserve Money Supply M2 yoy growth that I track to give me an idea of the pace of liquidity creation in the US monetary system.  It has peaked in 2012 in spite of further QE which has propelled the equity markets higher.  M2 in itself don’t mean much but belongs to an array of economic & other market indicators which I track. While we might see S&P500 ending higher and maybe even cross 2,000 level by December 2014.  But Asianmacro will take his chips off the table for now, pour himself a glass of nice burgundy, followed by a fabulous single malt whisky and watch the FIFA2014 World Cup action unfold.  The market is now left to the losers who need to be around. Not me!

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