Sentiment continues to oscillate between the high 40’s and 50’s ranges. The latest readings are still below the recent high of 55, but we suspect that the markets are likely to rally to an insanely overbought state that could/should correspond to bullish readings of 60 (plus or minus 2 points) before a top is in. Hence it is possible that the Dow could trade past 31K. High V readings widen the extremely oversold and extremely overbought ranges
Weekly Chart of the Nasdaq
Adding fuel to the fire is the fact that the Nasdaq is now trading in the oversold ranges on the weekly charts, so this favours high prices in the short term; Hence it appears that the Santa Claus rally is intact. However, we will continue taking profits, so expect the next issue to be short as the focus will be on tighter stops and taking more profit. We are taking profit not because we are nervous but because there is a good chance, we could get into many of the current plays at a more favourable price. Additionally, it is always prudent to be cautious when bullish sentiment is trading well above its historical average for several weeks on end.
We would like to emphasize again that we are not taking profits because we are fearful, we are just following Tactical Investor Protocols that state one should be slightly cautious when bullish sentiment continues to trend well above its historical average.