State of the Market Address:
- The Dow remains just above 21,000.
- Shiller’s Adjusted S&P P/E ratio is now at 29.48 Arguably the second highest level in history (if we adjust for 2000 distortions) and right behind 1929 top at 29.55.
- Weekly RSI at 70.56 – remains at overbought levels. Daily RSI is at 63.20 – neutral.
- Prior years corrections terminated at around 200 day moving average. Located at around 17,500 today (on weekly).
- Weekly stochastics at 86.31 – overbought. Daily at 88.33 – overbought.
- NYSE McClellan Oscillator is at +1. Neutral.
- VIX/VXX remain near their historic lows. Commercial VIX long interest was slightly higher this week Now at 72K contracts net long.
- Last week’s CTO Reports suggest that commercials (smart money) are shifting their positioning to net short. In fact, short interest further increased as compared to last week. For instance, the Dow is 5.25X, the S&P is at 2.5X, Russell 2000 is at 3X and the Nasdaq is at 5X 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.