Inflection Point or Half-Way Mark?


The $SPY daily chart above has vertical lines to indicate times when the market has traded above an 8-period moving average for 16 consecutive days. These are times when the market was on a long run to the upside and felt terribly stretched, very similar to conditions we’re currently experiencing.

This condition has happened five times since mid-2010. In some cases, these conditions coincide with price exhaustion and a short-term top (annotated in red). Others times, it was merely a speed bump of consolidation on the way to higher prices (annotated in green).

The market does feel risky here, but we’re certainly not in uncharted territory, and the outcome is certainly not black and white.  What do you think: short-term pullback or consolidation and higher prices?


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