From time to time, I post a the chart below to show how overbought/oversold we truly are in this current market. Over the past couple of years, when this overbought indicator starts banging its head against the ceiling of the parameters that measure it, we have typically see an imminent downturn, if only it lasts a couple of weeks.
The chart below shows the NYSI Advance/Decline of all stocks on a weekly basis. As you can see there is a glaring bearish divergence on the RSI (Relative Strength) on the top of the chart, where the RSI is putting in a lower high despite the S&P putting in a new high. As mentioned earlier, we are in a perilous zone for bulls as we are extremely overextended and in years past, whenever we get to this point, the bulls start heading for the exits until they can get a hold of some stocks on the cheap end. So I would not be surprised to see a sell-off here in the coming days and weeks. Honestly, in my opinion, I could see the sell-off being pretty rough for the bulls, considering how euphoric they were on the rally, allowing for their optimism to run out of control.
Click Here to See the NYSI Overbought/Oversold Market Indicator.
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