By Lawrence G. McMillan
The S&P 500 index ($SPX) has tagged its upper “modified Bollinger Bands” (mBB) a couple of times recently, but in neither case was a sell signal triggered. So far, this has been the “correct” move, as $SPX has moved higher. Eventually, though, this sell signal will take place, and one should be prepared to act on it. Figure 5 shows a close-up of the recent action in $SPX.
The first “tag” came on the day before Thanksgiving, when a strong rally brought $SPX right up to its +4σ Band. But it didn’t close above that Band, so even though it pulled back and closed below the +3σ Band a couple of days later, no sell signal was generated (in my opinion – an opinion which I voiced in the following week’s newsletter).
Subsequently, $SPX rose strong once again, and beginning with a strong rally on December 7th, $SPX rose above the +4σ Band and stayed there for five consecutive days – all the while rising sharply. So this is certainly a setup for a sell signal...
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