Our outlook is fundamentally driven, but also technically supported as we feel the market is extremely overbought, and many indicators further this notion. The SlowK indicator (an indicator from 0-100) read a whopping 95, with the slowK in the 70s, mirroring the readings of May 1st, the start of the major downturn that caused SPY to lose nearly 550 basis points of its value in the month of May. The is showing signs of impending movement as the second derivative is negative. The DI+ is also decreasing at the moment, while the DI- is increasing on the Wilder . The also reached 70, again, just like May. The agrees, as the reading indicates that this security is strongly overbought, with a value of 168, near the 170 seen on 4/29, prior to the drastic down-move. These similarities ought to be duly noted, and are indicative of the strong sentiment that is beginning to prevail.
Fundamentally, there are many key issues that haven't been solved, yet, somehow we are near all time highs. The notion that with trade tensions still present (between not only China, but also the EU and Mexico, among others) all time highs are reached is befuddling to us. Using the CAPE (cyclically adjusted price to multiple) measure promulgated in Benjamin Graham's classic, companies also seem extremely overvalued. Also, we note that the strong jobs report on Friday completely curtails the chance of a 50 bp Fed Funds Rate cut, and lowers the possibility of the 25 bp cut that is priced into rate markets.