Technical conditions also point to a vulnerable market. Breadth has been narrowing and did not confirm new highs in the averages. Daily new stock highs peaked in May and recently have been trending lower. The Russell 2000 has been lagging the large-cap averages. Some speculative high-P/E momentum stocks have recently been hit hard. Tessler is down 37%, Cree 27%, Fleetmatics 26%, Facebook 15%, and Linkedin 14%.My view:
Investors Intelligence bulls have averaged a historically high 54% and bears 16% over the past four weeks, numbers indicative of market extremes. According to Vanguard, investors, as a group, have a 57% allocation to equities, an amount exceeded only twice in the last 20 years----the late 1990s and prior to 2007-2009.
While we certainly could go higher from here in the general market, it seems that the risk level is getting rather high.
With all the interference in normal market operations by central bankers, it is difficult to say if we are at an intermediate or long term top. The upward momentum seems to be hanging by a hair in my view.
Given the current situation, we could finally see precious metals rise as the risk off lever is pulled in equities.