There are a zillion ways to measure the historical times when the market's advance or decline has exceeded normal rallies. We use the advance/decline line and the deviations from trend for our overbought readings. In the chart below, you can see that the NASDAQ has moved to a level that is higher than any other time in the last two years.
Click on the image above to view a larger chart.
Sometimes this is a prelude to a correction - sometimes a serious correction, especially in these last two years. If you took a look at this indicator on a longer time frame, you would notice the changing characteristics of the rallies since the devastating bear market collapse in 2008-2009, and that the rallies in these last two years have produced higher levels from this overbought indicator. But even with that said, today's level has reached that "higher" extreme.
Along with the overbought/oversold indicator above, we have several of our Psychology indicators that have reached extremes that often presage a correction, as we have been mentioning over the past few weeks. This is important for the short-term, but remember, Psychology is only one part of the process we follow that also includes Monetary and Valuation, and these two indicators remain at bullish levels.
Historically, when you have 2 against 1 as we do today, you do get some short-term quesiness (sometimes), but in the upcoming 12 months, you almost always have a positive response.
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