Another S&P Closing High -- Do Traders Have a Sense of Capitulation?

NEW YORK (TheStreet) -- The hedge fund community continued its buying frenzy on Thursday ahead of Friday's speech by Federal Reserve Chair Janet Yellen in Jackson Hole, Wy.

Whatever she has to say, it may very well be met with a selling frenzy.

The DJIA continued its winning streak on Thursday, gaining 60.36 points to close at 17039.49. This is not quite a record closing high but getting close. The S&P 500 did set a new all-time closing high again, up 5.86 at 1992.37. The Nasdaq was up 5.62 at 4532 while the Russell 2000 closed up 2.52 at 1160.03.

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At last check, the Russell 2000 is still down for the year to date. Also, once again the S&P 500 Trust Series ETF (SPY) volume was a pathetic 68 million shares traded on Thursday. This was the fourth up day in a row on air.

The Nasdaq finished the trading day with an extremely overbought algorithm number of 99.10 out of 100. The DJIA and the S&P 500 will both have an extremely overbought algo number on a green open Friday. The fact of the matter is, these are not sustainable levels. The hedge fund-programmed machines have created an environment that is set up for a down draft of major proportions.

As Raghuram Rajan, the governor of the Reserve Bank of India, recently said, "We are taking a greater chance of having another crash at a time when the world is less capable of bearing the cost. Investors are counting on easy money -- they put the trades on even though they know what will happen as everyone attempts to exit positions at the same time. There will be major market volatility if that occurs."

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