Daily Stock Market Update & Forecast – August 16th, 2017

– State of the Market Address:

  • The Dow finds itself back above 22,000.
  • Shiller’s Adjusted S&P P/E ratio is now at 29.89 Off highs, but still…..arguably the highest level in history (if we adjust for 2000 distortions) and now above 1929 top of 29.55.
  • Weekly RSI at 73.06  – overbought. Daily RSI is at 67.32 – slightly overbought.
  • Prior years corrections terminated at around 200 day moving average. Located at around 17,900 today (on weekly).
  • Weekly Stochastics at 90.26 – overbought. Daily at 57.54 – neutral.
  • NYSE McClellan Oscillator is at -31. Neutral.
  • Volatility measures VIX/VXX have spiked higher off of their historic lows during the week. Commercial VIX long interest remains the same. Now at 100K contracts net long. 
  • Last week’s CTO Reports suggest that commercials (smart money) are shifting their positioning to net short. Short interest has decreased slightly during the week. For now, the Dow is 5X, the S&P is at 2.5X, Russell 2000 is net neutral and the Nasdaq is at 2X short. That is a substantial 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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