I could talk about the resistance overhead but then I'd be telling you what you hear everywhere you turn, wouldn't I?
Just over a week ago when I first noted we'd be overbought, using my Oscillator, on Thursday of this week I also noted that resistance on the S&P was 2,600-2,620. At the time the S&P was so far away from resistance that I said if we get to resistance when we get overbought I'll think it's a big deal. I still think it's a big deal but unfortunately if you are a contrarian you don't want to hear that everyone else thinks it's a big deal too.
Just look at the resistance overhead. First here's Nasdaq. Nasdaq has its still declining 50-day moving average line not far overhead, just beyond 7,000.
The S&P is similar in that its 50-day moving average line is around 2,620 and it is still declining.
The Russell 2000 has also pumped its way to just shy of resistance at 1,450, where its still declining 50-day moving average resides.
Let's talk about the Russell's (and everyone else's) 50-day moving average line. You see, 50 trading days ago was late October (blue arrow). If we replace higher numbers with lower numbers the moving average line continues downward. As you can see in the next two weeks this will drop higher numbers because just as the index's price today is catching up to that level, we got that late October/early November rally. So we're like a dog chasing its tail on the 50-day moving average line.
However, after that it starts to get a bit easier for the moving average line to flatten out, as it starts to drop the trading in November and December. That would put me in the same spot I have been in: a pullback from the overbought condition should lead to another rally. Yet I hate being in the same camp as the majority who are also looking for the indexes to stop here at resistance.
Now let's talk about the Dollar. I have not liked the U.S. Dollar for almost two months. It took its sweet time coming down but Wednesday finally saw the crack. And of course everyone noticed. I think sentiment has shifted greatly from when it was at the highs and the Daily Sentiment Index (DSI) was well over 90 but has not shifted enough for me to get bullish on the Buck. The DSI is now 49 so there is plenty of time for more folks to get bearish on it. However, My guess is the $94-$94.50 area sees a bounce. $95.50 would be resistance now.