Daily Stock Market Update & Forecast – August 7th, 2017

- State of the Market Address:

  • The Dow has broken above 22,000.
  • Shiller's Adjusted S&P P/E ratio is now at 30.30  Arguably the highest level in history (if we adjust for 2000 distortions) and now above 1929 top of 29.55.
  • Weekly RSI at 79.66  - overbought. Daily RSI is at 77.68 - overbought.
  • Prior years corrections terminated at around 200 day moving average. Located at around 17,850 today (on weekly).
  • Weekly Stochastics at 99.66- overbought. Daily at 98.75 -overbought.
  • NYSE McClellan Oscillator is at -17. Neutral.
  • Volatility measures VIX/VXX are once again sitting at or near their historic lows. Commercial VIX long interest increased somewhat. 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 4X, the S&P is at 2.5X, Russell 2000 is at 1.5X 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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