Am I a broken clock?
Or is the rest of the world figuring out what we’ve been saying all along?
The primary indicator that I use to measure risk in the market is the New York Stock exchange bullish percent chart. This chart merely tells us the percentage of stocks that are currently on buy signals.
Historically, we entered the “high risk zone” when we are in X’s and this number exceeds 70%. We are currently in X’s at 74%.
But this indicator moves a little slower than I would really like. So I often like to see what the short-term indicators are saying as well. The short-term indicators are all pointing towards some weakness in the market.
Remember, these indicators measure supply and demand, not actual price movement. So what all these indicators are trying to tell you is this: the market has been experiencing a very solid move upward. However, we are starting to see clear signs that supply is overtaking demand. Any time, in any kind of market (whether that be real estate, commodities, books, cars, anything), when supply outstrips demand, prices must fall.
The only thing we really can’t tell you regarding the market for certain is when, and how far.
What we can tell you is that storm clouds are starting to appear and were starting to get random reports of lightning and thunder. Like I’ve mentioned before over the last couple of weeks, we’re in the eighth or ninth inning of this ball game. We may find out shortly that it’s time to take our bat and ball and go home. Right now, we will keep things “as is.”
As always, we’ll keep you plugged in and let you know when it’s time to make a move.