This past week of moves into new highs was one of the oddest moves to new highs I have ever personally seen. Just when I think I have possibly seen it all, the market serves up something completely different and unexpected. However, the only thing that never changes on wall street is constant change. So to be honest, this is not all that surprising. On Friday, stocks ended mixed with the Russell 2000 and DJIA higher with the rest of the major market averages finishing lower. Volume was lower giving the session an overall decent day of “consolidation.” The brightest spot on Friday came from the overall breadth as advancers beat decliners by a small margin.

Is this market overbought? You better believe it is. It was almost overbought heading into the past week and it is now overbought as we head into the new trading week. That does not mean that it can not stay overbought longer than the shorts can stay solvent but with the market now in overbought territory in my four main oscillators that I track on all the major market indexes on an intermediate term basis it does not pay to chase performance in the short term if you are underinvested. There are a lot of traders fighting this move and a lot of bulls underinvested and if this market is going to continue higher you can be sure it will pullback at some point offering better entry levels for EOD trend followers.

I will admit that it has been beyond impressive how the market has climbed the most recent wall of worries straight up in yet another extreme v shaped move. However, it does appear that on the short term bullishness is starting to rise as the AAII survey has bulls over bears 37% to 24%. The CNN Money Fear & Greed index is at 90 which places it in the extreme greed category and at levels not seen since the summer of 2014. On the flip side, in what must be a lagging report or survey, the Investors Intelligence US Advisors survey is showing 25% bulls to 53% bears. This has to be from the immediate after-math of the Brexit vote. There is no way it is that skewed now but those levels are 5-year lows and highs respectively. The ultimate contrarian signal.

In hindsight, it is now clear, that the Brexit sell off created some of the most bearish sentiment among traders since the 2011 summer sell off. I remembering being quite bearish internally following the news. The great news is that I remained disciplined and let my stops determine if I should be in or out of each position. This is the reason that I am still 50% invested on an EOD basis. The bad news is that this move into new highs is the first move into new highs the past two plus years that I was not already 100% invested on the long side heading into the move. Go figure that this is the one that sticks. That is the stock market baby. No use crying over spilled milk. Especially when the extra cash is being used on intraday and swing trade ideas in the low priced high beta names that are moving on a day to day basis.

Due to the short-term and now intermediate term overbought conditions it should be no surprise that once again we do not have any new long positions. Every high quality stock that I am interested in is either currently extended from their 20 or 50 day moving averages making any new long position here on an intermediate term basis extremely risky. I will be watching support levels in many leading stocks over the next upcoming sessions and will be watching for strong bounce attempts or pocket pivot point signals to develop in the current crop of leading stocks that I have been listing here on my watch list on a daily basis. Right now, it is best to exercise patience and let the market come to you rather than chase performance. Fear of missing out is not how I want to trade. I want great entries or I will take no entry at all. At least on an EOD trend following basis.

Have a great rest of your weekend everyone. Make sure to watch the video lesson and feel free to leave any comments or email me any questions you have in regards to the overall market and individual trading ideas that you might have. 

Video length: 00:06:44

TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – SIGNAL DATE

CLR long – +144% – 2/11/16
GRAM long – +83% – 4/1/16
HBP long – +72% – 3/28/16
EBIO long – +69% – 5/26/16
SIMO long – +53% – 3/11/16
GSS long – +39% – 7/1/16
ALRM long – +35% – 3/1/16
EBIX long – +30% – 3/18/16
FCPT long – +27% – 2/29/16
ABMD long – +25% – 3/29/16