Daily Stock Market Update & Forecast – April 17, 2017

State of the Market Address:

  • The Dow remains below 21,000.
  • Shiller's Adjusted S&P P/E ratio is now at 28.85 Arguably the second highest level in history (if we adjust for 2000 distortions) and right behind 1929 top at 29.55.
  • Weekly RSI at 65.34 Remains at overbought levels. Daily RSI is at 43.06 - neutral.
  • Prior years corrections terminated at around 200 day moving average. Located at around 17,400today (on weekly).
  • Weekly stochastics at 60.63. Approaching neutral levels. Daily at 48.80 - neutral.
  • NYSE McClellan Oscillator is at +-16. Neutral.
  • VIX/VXX remain near their historic lows. Commercial VIX long interest was slightly lower this week, but remains at near record levels. Now at 95K contracts net long. 
  • Last week's CTO Reports suggest that commercials (smart money) are shifting their positioning to net short.  In fact, short interest jumped dramatically as compared to last week. For instance, the Dow is 5.5X, the S&P is at 2X, Russell 2000 is at 2.5X and the Nasdaq is at 7X short. That is a significant short position against the market.

In summary: For the time being the market remains in a clear bull trend. Yet, a number of longer-term indicators suggest the market might experience a substantial correction ahead. The market remains at extreme valuation levels and severely overbought on both daily and weekly charts. Plus, the "smart money" is positioning for some sort of a sell-off.

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