Overbought, And More Overbought

1333, which was not where I expected resistance to show up, is for now where we are seeing it, although two days is not long enough to draw conclusions. Wed still have no distribution to speak of, despite IBD's count of 3, and although the technical indicators are weakening a bit, that just means the up trend is slowing down. Whether we top here or na little higher, we are approaching at least a short term top,a nd are due for a correction of probably 2-5%. When that comes is anyone's guess, but mine is that it will begin within a week.

You wouldn't think so just looking at the Nasdaq 100, which is still barreling up. Howver, MACD is betraying some weakening, and this may start rolling over at any time. Again, with no distribution, I seriously doubt we will have much of a correction.

Even the NYSE composite, among the weakest of the indexes, has broken out and is moving higher. MACD here, however, is starting to move down, so this probably won't go much higher. I see zero distribution days until you go all the way back to mid December. Those I would not sweat.

A week ago I expected the percentage of stocks above the 50ma on the NYSE would reverse and move down. It did, for about a day, and is now moving back up. Right now is is at an extrenme level, and historically speaking, doesn't stay this high very long. I expect it to drop down below 75 imminently, but then again, I was expecting that last week.

The same indicator on the Nasdaq, while not quite as extreme, is still extremely high and the probability is it won't stay this high much longer. It won't take much of a drop in the market to bring this below 70, and if it does go below 70, that could give the market the fuel for another substantial move up.

The market is now seriously overbought, but it has been for the better part of a month, and can get more overbought. A healthy 5% correction here will probably be the best case scenario for the bulls, especially if it is accompanied byt he appearance of real leadership. If we continue to go higher propelled by crap stocks coming off bottoms, this won';t last much longer, and the resulting correction will be that much worse.

I will have the new highs update shortly.