2/28/2014 5:40:08 AM

Good morning Traders,

It has always been our belief that money flow is a contrarian indicator. The first chart will show that bond money flow is very high:

This has me thinking that the potential for a final thrust higher here still exists. So as much as we are bearish, the frequency trade is for a bit more upside before turning lower.

So let us take a look at another measure:

As long as this CEMF measure trends higher, it is bullish for markets.

If you question our belief that money flow is a contrarian indicator, look at this indicator, which compares money flow to Investor intelligence bulls minus bear reading. The correlation is significant.

So what that means is that the market sentiment has room to rally. But let's look at the big picture:

Big picture, we know that at these levels the 1 month future return tends to approach zero. So we expect the market return to be muted over the next month. Or possible turning into a significant sell off, but as I always say, you never know what you are going to get. You just position for the potential move.

When price confirms this signal, we will start issuing our PUT recommendations through our options services.

Regards,