The market is still bullish even after the Fed giving up on near term rate hikes. No rate hikes are again good news! However, the markets are getting over extended in the short term. The Market Forecast posted a bullish cluster last week and almost again today.
The SKEW has come back down to 125 or so, but volatility actually rose today when the markets climbed higher.
Put/Call ratios are bullish and not signalling an overbought state in the market. Breadth indicators are also bullish.
The bullish end-of-May through begining-of-June period is coming to an end. Lackluster trading through the dog days of summer is likely ahead. If no news is good news, then the market will likely continue to drift higher.
Monday, June 6, 2016
Thursday, June 2, 2016
Maxed Out?
A few signs that the market may 'putter out' for a little while (if not reverse into a pullback) are arising. First, the Russell 2000 Index mini-futures have closed higher for 8 consecutive days. This is a rare feat.
The SKEW is troublesome also. Yesterday the SKEW closed above 130 and today reached 134. These numbers suggest heavy put buying, and have been used to time increases in VIX rather successfully prior to the 2015 anomaly when SKEW printed high for most of the year.
Also, the number of stocks above their 20 day moving average is getting to that critical 80% level, where usually the market lets the 20 day moving average catch up to the extended stocks by either trading sideways or pulling back.
Finally, the Market Forecast today showed Bearish clusters on the major indexes. This highlights that most everybody is already long over the very short, short and medium term.
Besides these warning signs, the market is bullish and all medium term indicators point to higher prices ahead.
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