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Playbook: National News Leads With Markets, Greed Index Near 100

Next week, the markets will put in a near term top. Yes, it is that simple to see if you know how to read the charts. The proprietary PPT Strategies clearly show a top followed by a pull back in the first week of February. The play book is as follows. Stocks should gap higher Monday before turning choppy and weaker the rest of the week.

Just to give some background on past calls and profits. I stated at the start of 2013, the markets would push higher to the 1500 level on the S&P 500. This level corresponds to $150.00 on the SPDR S&P 500 ETF Trust (NYSEARCA:SPY). On Friday, the SPY closed at $150.25. This completed a perfect call. At this point I am turning to a more bearish view not only because the master target was hit, but because of other concerning factors. Let me lay them out below.

1. Mutual fund inflows continue at twelve year highs. Mutual funds are the primary investment tools of the average investor. Throughout history, when the average investor piles into the market, a top is very close.

2. The media is pumping the bullish view equal to each of the last major highs in the markets before a 10% correction.

3. The greed index tracked on CNN Money is at 94. The highest it can go is 100 and the lowest is 0. Excess greed and complacency signals a top or near reversal.

4. The VIX (Fear Index) is trading at levels not seen since just before the financial collapse.

5. Friday, the NBC Nightly News lead with a story on how great the markets were and how average investors were jumping back in, fearing they will miss the big run higher. Note. The markets are already up over 100% off their 2009 financial collapse lows.

6. Many stocks like 3M Co (NYSE:MMM), 3M Co (NYSE:MMM), The Home Depot, Inc. (NYSE:HD) and, Inc. (NASDAQ:AMZN) are at all time highs. Are things that good to warrant all time highs?

These factors plus the proprietary PPT Strategy calculations say a top will be put in next week, followed by a strong pull back in the markets. The average investor is jumping in and will be raped once again, as in the past.

Related: SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) and PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ).

Gareth Soloway
Chief Market Strategist