A Bull Market with No Fear

New highs in the S&P and with almost 25% of the stocks in the S&P 500 coming into the day with 2-period RSI readings above 90, a pause within day or so is now expected. The behavior overall though is bull market behavior with any signs of market weakness being met with a flood of buying.

When I look at the TradingMarkets Analytics Screener, I see that most of the higher volatility S&P 500 companies are overbought today whereas the lower volatility S&P companies are more neutral. This indicates to me that many long only big-cap equity funds and also larger hedge funds are playing catch-up here by buying the higher beta blue chip companies in order to pursue greater gains (you can see the same thing with such low VIX readings). Right now it’s a bull market with no fear and a market that has continuously punished those who have tried to pick a top since the first rally in 2009. Heavily shorting into this market has not been a smart game and will not be a smart game until the S&P breaks under its 200 day ma. If you are using fixed dollar risk in your trading (R), being long index call options on defined pullbacks remains the smartest path.

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