Where are we heading in US stock market?

US stock market is on a roll, markets are so strong that series of new all time highs have been made. It is so strong that participants are very comfortable with this TAPE.

Before we look further, let us look @ RSI and see what it is telling us now:

Nasdaq            79.53

S&P 500         76.57

DOW              72.62

IWM              72.08

EEM              68.24

SOX              66.68

GLD              66.63

XLB              60.42

XLF              60.26

When I look @ all of the above RSI numbers, overall it looks very healthy, indicating UPTREND remains intact.

However, Nasdaq, S&P 500, DOW and RUSSELL 2000 looks vulnerable in near term, which means maximum 3 Down days.

Those down days may be triggered with less than stellar earnings report form key companies.

As most Nasdaq, SOX and others have moved UP substantially anything less than perfect reports will be punished, I expect few of those happening shortly.

Once a bad report comes this week, it will create an environment of doubt about bull thesis meaning fear taking over.

Thus a pullback may last no more than 3 days.....

Then another good report will come out and all is well thesis takes hold.

As we are deeply overbought near term, probability is very high of 3 day pullback.

Euphoria is rampant....

Bull Bear ratio most bullish in 5 weeks, a contrary Indicator...fear is gone....

VIX @ 12.10 is all set to hit 16 in very short order.....

Impeachment hearing starting this week may play with sentiment and cause distraction.....

Even IF I am wrong, market may trade in a very narrow range to digest gains and deal with overbought condition.

IF nothing else, one can wait for a better entry point as rotation takes hold.

XLB materials sector is looking very bullish IF bull thesis is as strong as TAPE has been predicting.

Pullback, sideways & rotation may become theme going forward.

Good luck with your own thesis about TAPE.

BLOG does NOT give buy or sell.

Saleem

Posted in: Mixed