SPX short-term: Overbought!

The most important message of this post is in the title - this market is OVERBOUGHT, and very much so. Sure - it is also a sign of strength. But one thing's for sure - it is not the time to go long this market from a risk-reward perspective.

Very Short-Term

So, will we hit the high 1150s on Monday? Many folks are calling it a sure thing - after Friday, so it might not happen! But, anything is possible. Markets can sometimes stay overbought for longer than we're prepared for. Among the list of probable scenarios,  i favour sideways consolidation or a sharp pullback here, to an immediate thrust above Jan highs.

Supports are 1130, followed by 1126.

Short-Term
General direction is up, and we are far from the uptrendlines, which means the bias is to the upside on any pullbacks. However, the oscillators are big time overbought. So, i would have tight stops on shorts, or any existing longs. Or better yet, wait out this period until the haze clears.

Inverse Head & Shoulders Update
For folks who are following the IHS, the target can be worked out to be around 1180spx, but we may take a while to get there.

Shanghai Connection Update - one last time!
And for readers who've followed my early Shanghai Connection Theory - which enabled me to call the 1045spx turning point, along with some other indicators - here're the updated charts.

As you can surmise, after the initial copycat drop and rise (offset by about 5 months) - the correlation's dropped off now. Shanghai has been struggling to make upside since its blowoff top, whereas SPX has been relentless. This may be the last update on this theory, but do check back once in a while!

As an aside - for Orient-oriented folks, Shanghai could be developing a bullish medium term pattern.

Summary

You probably noticed that most of my updates are short-term in nature, as this phase of the market has no clear bullish or bearish direction medium term (at least to me), unless we move decisively either ways. So stay nimble if you can, or just sit it out! Monday could probably open slightly higher and drop thereafter. Will be watching the nature of the consolidation thereafter. A sideways consolidation would mean higher highs are ahead. A sharp drop instead to test the uptrendlines, would be very interesting.

All the best for the week ahead!