– State of the Market Address:
- The Dow finds itself well above 22,000.
- Shiller’s Adjusted S&P P/E ratio is now at 30.96 Now at arguably the highest level in history (if we adjust for 2000 distortions) and still above 1929 top of 29.55.
- Weekly RSI at 76 – overbought. Daily RSI is at 79 overbought.
- Prior years corrections terminated at around 200 day moving average. Located at around 18,100 today (on weekly).
- Weekly Stochastics at 98.6- overbought. Daily at 98 – severely overbought.
- NYSE McClellan Oscillator is at +3. Neutral.
- Volatility measures VIX/VXX remains at suppressed levels. Commercial VIX long interest increased to 105K contracts net long.
- Last week’s CTO Reports suggest that commercials (smart money) are shifting their positioning back to net short. Short interest has shifted slightly higher during the week. For now, the Dow is 11X, the S&P is at 3X net short, Russell 2000 is back to 5X net short and the Nasdaq is net neutral.
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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