A Few Clouds are Starting to Appear

We all like sunny days - no clouds, just blue skies.  In the last few weeks, I've cited many positive long-term trends, and I continue to think that 2013 will be excellent.  This year has been a delight so far, and we're seeing the broad market looking much better after 17 months of very dysfunctional performance.  We've also seen a very nice move on the upside since November when our overbought/oversold indicator moved down deeply in that bullish oversold position, which you can see in the chart below.

But here we are again...  It is not something to bet the house on, but we are now in a short-term overbought posture and the 10-day Arms Index, which measures the energy being used to push a stock market up or down is showing that it is taking a lot more fuel (upside volume) than the equivalent upside move in stocks.  That often relates to an impending pause. 

These are just a few of the clouds we see on the horizon this morning.  At this time we're still in a bullish posture, but we're keeping an eye on those clouds.  If they get any more ominous, we'll be looking to put up a little short-term protection. 

Don Hays 

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