If the market doesn't correct soon, I'll be utterly shocked. This won't necessarily be an indication to sell everything, but rather an indication to initiate positions on the dip. With the current buy signal given by the Dow and Transport averages, I am waiting for an opportunity to buy some stock funds.
The Dow 30, the transports and now the S&P are all oversold according to the weekly RSI reading, and so are putting in a major top. That means the next correction might be scary and even volatile but not the end of the world that people will say it is going to be.
The S&P had a huge spike in selling volume on March 15th, as was the case Feb 12, and 2013, Sep 21, 2012. I think that Feb 12th was nothing more than a market which was unsure of itself. Today, it looks more like profit taking, given the velocity with which the S&P rocketed to it's lofty heights.
On the daily charts, the S&P became oversold in January, only to make a 500 point move upward. Very strange indeed, yet contrasting with the weekly charts, we could see that oversold levels we not quite there yet. Another interesting point is that even from a monthly view, the S&P500 is very close to being oversold (69 and change).
All in all, this is the time where things get dicey. As a top is forming in a market, we want to be extremely attentive to how the indexes play off of each other. If that negative divergence re-appears, we want to be either hedged or ready to sell and short the market. These are the times when, if I'm correct, investors with the right attitude and intuition based on solid research can strike gold.
These are the moments we were made for as long-term investors. We need to have the courage to get into a fundamentally recovering market when no one else will, and the courage to get out of an overheated market when everyone else wants in.
