By Jeff Clark in the S&A Short Report:
With each passing day the technical indicators get more and more stretched to the upside and the risk grows larger. Buying into this market right now for anything longer than a day trade is foolish, bordering on stupid.
Yes, that's strong language. But, there's no other way to put it.
Given the fact that I started leaning bearish two weeks ago and stocks have continued to push higher then maybe I'm the one being foolish. After all, I'm the one swimming against the tide.
What we've seen lately, though, is abnormal. Normal markets don't move in a straight line. There's a natural ebb and flow. For the past few weeks, however, the tide has only come in. It hasn't gone out. Stocks have moved straight up with barely a hint of a corrective move.
That's unhealthy and it has setup a high-risk situation for the bulls.
We've seen this setup before. The obvious example was in 2000 at the peak of the Internet bubble. Stocks defied gravity for a while before the laws of physics we're finally obeyed.
October of 2007 provides a similar example. Stocks rolled higher for several weeks as they formed the top of the 2003-2007 bull market. The aftermath, of course, was difficult to endure.
Now we have an eight-week-old rally within the confines of a secular bear market. The Daily Sentiment Index of stock futures traders (courtesy of www.trade-futures.com) has rallied from 2% on March 9, to 80% today. Intermediate term technical indicators such as the NASDAQ and NYSE Summation Indexes are at historic highs and on the verge of turning lower. Penny stocks are showing gains of 100% to 200% over the past few days. And, investors' appetite for risk is insatiable. All of these are strong contrary indicators.
Crux note: You can learn how Jeff Clark plans to trade the coming correction with a trial subscription to the S&A Short Report. You can get started
here .
More Jeff Clark posts on short selling:
The best short selling opportunity of the year
Jeff Clark: Stocks are dangerously close to a big sell signal
Jeff Clark says the market's ready for a correction... Here's how to make a quick 25%
