Heading into Monday, the S&P 500 has gone 28 consecutive sessions without a decline of 1% or more. This has pushed 90% of S&P 500 constituents above their 50-day moving averages.
The Percent R indicator, a relative strength indicator that measures overbought or oversold conditions, has been above 80 (80 = overbought) for 21 consecutive days. The 2001 and 2007 market tops saw the Percent R indicator above 80 for 25 days before reversing sharply. It remains to be seen whether stocks can withstand a correction long enough to match or exceed the 2001 and 2007 80+ Percent R oversold streak.
The percentage of bullish investors tracked by the American Association for Individual Investors (AAII) climbed 8.9% to 41.3% while cash allocation dropped to 18%, the lowest level since December 2009 and July 2000. As a point of reference, cash allocation in March 2009 stood at 45%.
At current prices, stocks (short and long) are a risky proposition as the momentum still points up but the rally is running out of steam. Some follow through buying on Monday is likely. Monday has had a tendency to open strong over the past few months. The spillover effect from the positive unemployment numbers (that's at least how they are perceived) might contribute to another up gap Monday morning.
The pivot point for the S&P 500 for the upcoming week is 1,176. Resistance lies at 1,188 and 1,194. The S&P should find support at 1,170 and 1,159. If the S&P closes above pivot it is likely to trade between pivot and resistance. If the S&P closes below pivot it is likely to trade between support and pivot. A close below pivot would be the first sign of a shallow correction.
Such a correction, would give the market an heir of legitimacy, afterall the market can't go only up. Another rally following this correction should get support from investors in general and lead to more extreme sentiment readings which should coincide with a market top, perhaps between S&P 1,200 and 1,225.
My SPY/TIE puts are dead meat. LMFAO
