Overbought – Part II

The markets paused on Thursday as futures traders concentrated on rolling futures contracts and setting their sites on Friday’s options expiration.  As I discussed on Wednesday the rallies in the S&P 500 and NASDAQ 100 have been strong.  The SPX gained over 3% in less than a week.  The rallies were not fundamentally based but considered more of a “relief” rally in response to the diminished threat of the U.S. military strike in Syria.  The reality is that the markets got ahead of themselves very quickly in pushing prices nearly back to record highs.  In the process the broader indexes reached extreme overbought levels.  This has brought out many signs that the “bounces” are nearing an end.   The McClellan oscillator is again pushing into overbought and the move resembles what took place back at the June bottom, which ultimately lead to the declines we saw in August.  If nothing else the McClellan oscillator is suggesting stocks are currently extended to the upside. 

http://www.indicatorwarehouse.com/96548/overbought-part-ii/