I like this chart from Panamaorange at StockTwits:
I'm not a TA guy but I do know when things are overbought and oh boy are we overbought right now. Volume on the S&P ETF (SPY) was 57M yesterday as we busted up to new highs – that's about 1/2 "normal" volume of 100M, which is already down from 150M last year. Low volume means low conviction and we pair that with record ETF inflows (dumb money) of $56Bn and we know exactly what this rally is made of. Small Caps, Financials and Industrials captured most of the flows while, as noted yesterday, money is fleeing from Emerging Markets and Emerging Market Debt – we're simply the "safe haven" – for now…
And, of course, money is flowing out of bonds, which are a very bad thing to hang onto when interest rates are rising and December is on pace to blow November's numbers out of the water and, like Richard Gere, that bond money has nowhere else to go except into equities – regardless of how ridiculously priced they are.
And, of course, a person dumb enough to put their money into 30-year notes at 2% isn't going to think twice about running into equities that have a p/e of 30 – that's more like a 3.3% return, at least! That's also making dividend stocks extra expensive as the coupon clippers love dividend stocks and, as value investors, we're finding bargains very hard to find in that space but we're patient, we can wait for the correction.
Meanwhile, the Dow has climbed to the top of our target range already. Back on 11/25, we put up a hedge against our Russell Futures (/TF) shorts (was 1,350 then too!) that would cover us for an $11,250 profit if the indexes refused to back down – at the time I said:
In fact, the Russell 2,000 is just under 1,350 and that's up 200 points since early November (not counting their spike down) and that is just shy of 15% so the Dow is MILES behind