\t![\"\"](\"http:\/\/assets.jeffclarktrader.com\/ee-assets\/channels\/articles\/Screen_Shot_2017-10-05_at_11.17.57.png\")
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\tThe NYMO helps to measure overbought and oversold conditions. Before adding short exposure on the broad stock market, I’d like to see the NYMO reach overbought conditions by closing above its upper Bollinger Band (the solid, squiggly blue lines on the chart). It would be an even better setup if the NYMO could climb above 60 and enter “extremely overbought” territory.<\/p>\n
\tThe NYMO closed yesterday at 21.28. So there’s still plenty of room for it to work higher before being overbought.<\/p>\n
\tMany other daily technical indicators are in a similar condition. But we also don’t have any significant negative divergence that usually occurs before the market reverses. Look at this chart of the S&P 500…<\/p>\n
\t![\"\"](\"http:\/\/assets.jeffclarktrader.com\/ee-assets\/channels\/articles\/Screen_Shot_2017-10-05_at_11.19.36.png\")
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\tAs the S&P 500 has pressed higher over the past few weeks, momentum indicators like the moving average convergence divergence (MACD) and the Relative Strength Index (RSI) have pressed higher too. There’s no divergence between the action in the index and the action in the indicators. That tells us the trend is strong and is likely to continue.<\/p>\n
\tThe indicators are overbought, for sure. The MACD and RSI are both at the second-highest levels of the year. So, this probably isn’t a time to be aggressively adding new positions on the long side of the market.<\/p>\n
\tBut without any sort of negative divergence, and without overbought conditions on the daily indicators, there just isn’t a good argument for a short position right here.<\/p>\n
\tYes, the market is overbought and we could certainly get a quick move lower at any moment. But for the past couple of months, the 9-day exponential moving average (the squiggly red line on the S&P 500 chart) has provided support for the market. Every decline over the past two months has stopped at the 9-day EMA. It’s likely to hold as support on any quick decline from here.<\/p>\n
\tYesterday, the 9-day EMA closed at 2519. That’s just 19 points – or 0.75% – below where the index closed yesterday.<\/p>\n
\tThat’s not enough of a potential profit for me to justify taking a short trade. So, I’m on the sidelines for now and just waiting for a better setup.<\/p>\n
\tBest regards and good trading,<\/p>\n
![](\"https:\/\/casey-assets.s3.amazonaws.com\/images\/misc\/jeff-clark-signature.png\")
<\/div>\n\tJeff Clark<\/p>\n
\tP.S. <\/strong>What would it take for you to add short positions in this market? Do you know of any other signs showing the market will take a turn?<\/p>\n \tSend me your thoughts, along with any other questions or suggestions, right here<\/a>.<\/p>\n \tReader Mailbag<\/h2>\n