State of the Market Address:
- The Dow is once again above 21,000.
- Shiller’s Adjusted S&P P/E ratio is now at 29.88. Arguably the highest level in history (if we adjust for 2000 distortions) and now above 1929 top of 29.55.
- Weekly RSI at 70.31 – neutral. Daily RSI is at 64.75 – neutral.
- Prior years corrections terminated at around 200 day moving average. Located at around 17,500 today (on weekly).
- Weekly Stochastics at 81.16 – neutral. Daily at 92.89 -overbought.
- NYSE McClellan Oscillator is at +25. Neutral.
- Volatility measures VIX/VXX are once again sitting at or near their historic lows. Commercial VIX long interest was slightly higher this week Now at 77K 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 slightly during the week. Once again, due to profit taking. We should expect higher short interest numbers at the end of next week. For now, the Dow is 3.5X, the S&P is at 2X, Russell 2000 is at 2X and the Nasdaq is at 3X short. That is a significant 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.
ELLIOTT WAVE UPDATE:
Since many people have asked, I will attempt to give you my interpretation of Elliott Wave and how it is playing out in the market. First, I must admit. I don’t claim to be an EW expert, but I hope my “standard” interpretation is of help.
Let’s take a look at the most likely recent count on the S&P.
Explanation:
Long-Term: It appears the S&P is quickly approaching the termination point of its (5) wave up off of 2009 bottom. If true,we should see a massive sell-off later this year.
Short-Term: It appears the S&P might have completed its intermediary wave 3 and now 4. It appears the market is now pushing higher to complete wave 5 of (5). If true, the above count should terminate the bull market.
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