We’re Reaching Extremes
Even though the market has done little the past two days (its paused), the behavior has been in-line with the behavior of 2012 and 2013 which were typical bull market years. Overbought is now very overbought and this is a much better sign than multiple days down followed by a big up day (with no follow through) as was seen from December through last Wednesday.
On a shorter-term basis we’re reaching extremes. Over 25% of the liquid non-leveraged ETFS have 2-period RSI readings above 95 and these levels are usually not sustained for too long. We’ve anticipated a pause/pullback over the past two days and the pause has been there. A short-term pullback now is very likely.