This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Another All-Time Bubble High for the S&P 500

NEW YORK (TheStreet) -- Another all-time bubble high for the S&P 500 as the index closed at 1890.90 on Wednesday, up 5.38 points. The DJIA closed up 40.39 at 16,573. The Nasdaq closed at 4276.45, up 8.41 and the Russell 2000 gained 4.10 to close at 1192.

The unofficial SPDR S&P 500 ETF (SPY) volume was the lowest since the S&P 500 low last Thursday. Not only was the volume on Wednesday the lowest in four days, but it appears to be the lowest volume day since Jan. 22, 2014. 

The SPY volume on Wednesday, or lack thereof, was significant enough to mention. There is absolutely no buying conviction in this market right now. Most of the volume is coming from the algorithm programmed shorts that are covering their books at the highs because they shorted at the market lows last week.

It appears that the short hedge fund community that sold the S&P 500 lows last Thursday, threw in the towel today, and bought the all-time highs. I have said on many occasions now that the short hedge funds are notorious for doing that. Their timing could not be any worse.

Buying this all-time high is the absolute wrong strategy to have. The S&P and DJIA will now be well into overbought territory Thursday on a green open. The Nasdaq and Russell 2000 are not close to those overbought levels, but we have had a 2-tiered, out-of-sync market for a while now.

This market is going to roll over in the very near future, starting on Thursday or within a few days after that, according to my algorithm process. That is the same process that signaled the S&P low last Thursday. Caution is warranted right now. Buying this market at these levels takes on much risk. Having a risk-management process is very important right now.

The risk is so high that on a scale of 0-100, there are 6 points of upside vs. 93 points of downside. That is a risk that no trader or investor should be willing to assume.

We need the markets to have some profit-taking and to reset at lower levels. The trade (a 3 week or less time frame) and trend (a 3 month or more time frame) are still bullish. We are not bearish by any means, but there are better entries out there in the markets. There is no need to chase the bubble highs. Patience is the optimum word/strategy going forward on a short-term basis.

At the close of trading on Wednesday, I owned the Proshares Ultra VIX Short-Term Futures (UVXY) and had Kinder Morgan (KMI - Get Report) short.

At the time of publication, the author had positions in UVXY and KMI, although positions may change at any time.

T
his article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
KMI $34.64 0.00%
UVXY $26.04 0.00%
AAPL $121.30 0.00%
FB $94.01 0.00%
GOOG $625.61 0.00%

Markets

Chart of I:DJI
DOW 17,689.86 -56.12 -0.32%
S&P 500 2,103.84 -4.79 -0.23%
NASDAQ 5,128.2810 -0.5040 -0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs