State of the Market Address:
- The Dow remains above 21,000.
- Shiller’s Adjusted S&P P/E ratio is now at 29.87. Arguably the highest level in history (if we adjust for 2000 distortions) and now above 1929 top of 29.55.
- Weekly RSI at 72.84 – overbought. Daily RSI is at 63.54 – neutral.
- Prior years corrections terminated at around 200 day moving average. Located at around 17,650 today (on weekly).
- Weekly Stochastics at 94.5 – overbought. Daily at 68.11-neutral.
- NYSE McClellan Oscillator is at -2. Neutral.
- Volatility measures VIX/VXX are once again sitting at or near their historic lows. Commercial VIX long interest was identical to last week. Now at 90K contracts net long. We should see volatility long interest higher over the next few weeks.
- Last week’s CTO Reports suggest that commercials (smart money) are shifting their positioning to net short. Short interest has increased significantly during the week. For now, the Dow is 5X, the S&P is at 3X, Russell 2000 is at 3X and the Nasdaq is at 17X short (vs just 4X short last week). That is a massive short position against the market.
In summary: For the time being and long-term, the market remains in a clear bull trend. Yet, a number of longer-term indicators suggest the market might experience a substantial correction ahead. Plus, the “smart money” is positioning for some sort of a sell-off.
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