Yesterday the SPX violated the Overbought level with a vengeance; and will probably do so again today near the open. Today’s Overbought / Oversold levels come in at 1318 / 1260. We are a long way from the depths of Monday’s lows under 1270 and no one would blame you for taking some long equity exposure off the table here. At 1325, the SPX would be up ~5.5% on the year and that is more or less about the return you should expect on an annualized basis going forward. I do think the SPX has a little more upside and a two to three week period of respite until the next GDP & Unemployment releases (6/28 and 7/6, respectively), which have acted as catalysts for downside pressure. We were clearly oversold on Friday and we are near a short-term overbought level this morning, but I think the question that needs to be answered is in which direction the next 40 point move will be. The SPX has spent the majority of this calendar year above current levels and I think it is reasonable to assume that there is more to come from the current rally.
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