Many Indicators hitting extremes

Many of the shorter term sentiment indicators we follow are hitting extremes. As this momentum driven rally continues to push higher, many traders and investors are finally jumping on the bandwagon. Although it may be very tempting to jump in here, we would avoid adding new positions to your portfolio at these levels.





















See chart above From Dorsey Wright:
Looking at the All Equity Fund Overbought / Oversold (OBOS) below, one can see that the average trading band for equity funds is now pushing closer to the 150% overbought territory. In the context of overbought and oversold extreme readings, this current level would rank up there among the most overbought readings in the last 6 years. Extreme readings here are simply a caution to those investors who are seeking to add full positions to their equity investment allocation at this time. The potential for the market prices to pull back down toward the middle of the trading bands has grown here and you can think about adding partial positions and then the remainder when the NAV has a chance to cool down.

From Jason Goepfort: * The number and variety of extremes are too numerous to mention, and we had to leave many out. Like the 2nd-biggest surge in Nasdaq 100 speculative bets by Rydex traders (the biggest was right at the January peak). And the renewed bullishness of individual investors.