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S&P 500 Sets an All-Time Closing High but It's All Smoke and Mirrors

NEW YORK (TheStreet) -- The hedge fund community was able to close the S&P 500 index at a new all-time high in Friday's trading. I will give the hedge funds kudos for that.

But I will also remind traders and investors out there that it was all smoke and mirrors. The S&P 500 Trust Series ETF (SPY) had its lowest trading volume in 2014. Not only that, I went back to June 2012 and the SPY volume on Friday was the lowest since then, excluding the early Christmas Eve closings.

The DJIA closed up 63.19 points at 16606.27 and the S&P 500 closed up 8.04 at a new all-time high of 1900.53. The Nasdaq finished up 31.47 at 4185.81 and the Russell 2000 closed at 1126.19, up 12.32.

I am sure most of the Wall Street pundits will focus entirely in the new all-time closing high this Memorial Day weekend and tell you how strong this market is and we will continue to go higher. I have no clue what the market is going to do.

Everyone is in the predicting business because that is what people want to hear. I am here to just tell you that a market without volume has the potential to create a liquidity issue.

Disregard the pundits who say it is different this time. It is never different. It may take on a different form but it never changes.

As of the close of trading on Friday, my internal algorithm numbers have the Nasdaq in extreme overbought territory next Tuesday if it opens higher. The momentum stocks that I have been writing about will all be extraordinarily overbought. This can only mean one thing: This market comes down next week.

The magnitude of the selloff is the only question that remains. If I am in the minority in this assessment, that is perfectly fine by me. I am a champion of the little guy who tries to succeed against the large momentum hedge fund machines.

For those traders out there who are looking for an alternative trading style that will set yourself apart from the crowd, look no further than We do not have to be that majority who chases momentum. Live Deal (LIVE) was an extraordinarily oversold stock that was mentioned in Thursday night's email to subscribers. It was quite the day for those subscribers who purchased shares at the open on Friday morning.

So, looking forward to next Tuesday, I am positioned for a selloff. On Friday, I added to my short position in AmerisourceBergen (ABC), a large -cap stock that has an extraordinarily overbought algorithm number of 99.99. I covered my Yandex (YNDX) short for a 4% gain in pre-market trading. I also started a new short position in a small-cap stock named EPAM Systems (EPAM). It also has an extraordinarily overbought number of 99.99.

At the time of publication the author was short ABC and EPAM.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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Chart of I:DJI
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