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Of Course This Market Can Go Down

4. Markets are overbought on a technical basis. Generally, the major indices are at levels from which significant declines occur. A peek at the percentange of S&P 100 stocks above their 200-day moving averages tells the story as we see that current levels of bullishness tend to mark market tops and are usually followed by meaningful declines.


5. Too much bullishness widely in evidence as investors and traders have been totally conditioned to "buy the dip" and believe that the Fed has their backs. The VIX (the CBOE S&P 500 Volatility Index), also known as the "fear index," languishes near historic lows while margin debt is near record highs, similar to those readings of July 2007, set just three months before the beginning of the financial crisis and related bear market.

So can this market ever go down? Yes. Will it ever go down? Yes, and that could happen soon. Wall Street Sector Selector remains in red flag status, expecting lower prices ahead.
John Nyaradi is Publisher of Wall Street Sector Selector, a financial media site focused on news, analysis, and information about Exchange Traded Funds (ETFs) and global financial and economic developments. John's investment articles have appeared in many online publications and he is a frequent guest on numerous financial media outlets. His book, Super Sectors, is published by John Wiley and Sons and included among the "Year's Top Investment Books" in the 2011 Stock Trader's Almanac.
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Chart of I:DJI
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