Mount Everest is the tallest mountain in the world, at just over 29,000 feet. There is a short window of opportunity to climb it, mostly during May, when the weather is clear enough. Over the years, many have died trying to make it to the summit.
The death-zone for mountains is over approximately 26,500 feet. For that reason, many take supplemental oxygen with them when they climb Everest. Even with oxygen, many lose their lives. This year there were an extraordinary number of deaths, many of whom climbed with oxygen, made it to the summit, but then died on their way down. There are several reasons why the climb is so deadly, but it's widely believed that so many died this year because it was simply too crowded on the mountain, and therefore it took too long and the oxygen ran out.
I thought of this on Tuesday, when I saw the S&P 500 get to 2910 and back off. I heard someone say that despite the many times in the last 18 months that the S&P has rallied over 2900, it has been unsustainable up there. I wondered, could 2900 on the S&P be the death-zone for stocks? Does the market have enough oxygen to sustain itself over 2900?
For that we look to the Overbought/Oversold Oscillator first. My notes say that this will reach a maximum overbought reading sometime between Thursday and Monday (more likely Monday, but it's rarely an exact day).
Then I turned to the Nasdaq Momentum Indicator. I walked it up another 200 points over the next week or so and discovered that the Momentum Indicator peaks on Friday. So that makes it overbought in the same time frame as my Oscillator.
I was also asked if the fact that the Nasdaq TRIN (Trading Index) is so low is bothersome. It is true that when the moving average is so low Nasdaq tends to have a pullback. Most of the time the pullbacks were short lived, but I would say that this indicates an upcoming overbought condition.
Yet sentiment is far from giddy (there are not that many on the mountain). Heck, we began the day with the put/call ratio at 61% and by the end of the day, it climbed to 98%, so I do not see complacency. We did see the Investors Intelligence bulls climb back to 48% (from 42% a week ago), but as I explained yesterday, it would be highly unusual if folks stayed so bearish with a run of 6%-7%.
For now, I see the market the same as I have for over a week. Pullbacks are likely to lead to another rally. I think we're heading toward an overbought reading, but I don't think there are too many people on the mountain yet.
Note: Helene Meisler will not write her column on Thursday, but will return on Friday.