Stocks have recently run to new highs, surpassing the levels they first set back in 2007. However, we have a 9-13-9 DeMark sell signal on the S&P 500 monthly chart:

spx monthlyInvestors have also become very complacent recently. I’m not referring to sentiment surveys here; we’re talking what investors are really doing with their money. And they’re not buying any put protection right now. In the past, this sort of complacency has signaled a short-term top was near.

put-callThe Nasdaq has also recently triggered a DeMark 13 sell signal on the monthly chart just as it runs into the 61.8% Fibonacci retracement of the decline that began in the fall of 2000.

nasdaqI’m watching Nasdaq darling Tesla, which has gone completely parabolic so far this year, for signs of waning momentum here.

teslaI’m also keeping a very close eye on the bond market for clues to where we are headed. The stock market strength over the past month has seriously diverged from bond weakness. Either bonds should rally or stocks sell off for this disparity to be rectified.

stocks and bondsAnd taking a look at bonds, either this support will hold and we will see a new trading range form…

tlt weekly2…or bonds will continue to selloff back to their longer-term trend line which lies about 10% below current prices.

tlt weeklyMuch of this is left to the discretion of the Fed. Their views towards maintaining or reducing “quantitative easing” will drive the action over the near term. A lot can be learned from paying attention to a very similar experiment going on in Japan where they are much farther down an even more aggressive path of central bank easing.

I’m watching the Nikkei to see how investors are reacting to the Bank of Japan’s uber-aggressive policies.¬†After starting the year on fire the Nikkei has struggled to keep its momentum and risks forming an awkward head and shoulders top.

nikkeiFurthermore, a longer term look shows the index running into very significant resistance.

nikkei monthly

As for the Nikkei, it’s been trading largely on what the Yen is doing. A strong Yen means investors don’t believe the Bank of Japan has the power to stimulate enough to make a real difference. Either that or they are not aggressive enough relative to the Fed. And the Yen looks to be forming a fairly rounded bottom here.

yen

Regular readers know I’m not bullish on the stock market’s current prospects. Obviously, I don’t know what the future holds but these charts will tell the story as it unfolds.

See all of my public charts at StockCharts.com