I want to be clear in stating that I do not know what is going to happen in the future. I do not know where the S&P 500 Index is going to trade tomorrow let alone 6 months from now. Most market pundits simply will not admit to this fact.
These same market pundits seemingly are unable to be honest about their own fallibility. In their own mind they believe it undermines their credibility or will hurt their forward sales for some book or strategy they are going to unveil. I for one do not prescribe to that notion, I believe in telling the truth.
The truth is that these so-called market experts do not know anymore than you or I about price action in the distant future. However, what I do know is that forward price action remains a mystery until its unveiled in the present.
Instead of wasting time discussing potential price action in the future, why not focus on a few pieces of information that have occurred that are known facts right now. I think the chart below points out that in the intermediate time frame, equity indexes are reaching extreme overbought conditions.
As can be seen above, the number of stocks trading above their 50 period moving averages is reaching close to the highest levels in the past 5 years. Many times when these price levels have been reached we witness a correction at the very least and any short-term gains are usually given back in short order. This is not to say that prices are going to sell-off tomorrow or in the next few weeks, however it is a warning that a correction is likely lurking in the not-so-distant future. (more)
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