The best thing the market has going for it is that sentiment is still not extreme even though I believe there is now too much bullishness. The Investors Intelligence survey is a great example of this. The bears in the survey stand at 24%, which is a low reading. However, a reading in the area of 20% has been a much better sell signal. The possibility that sentiment will reach an extreme is what keeps me from getting aggressive on the short side and has me only modesty short.

While I am not pressing too hard, there is a decent chance of swift move lower. I believe the short base has been all but destroyed. If participants ever find a reason to sell there will be few shorts to soften the decline. The market remains overbought and there is too much bullishness. I believe the market is vulnerable in the short term.

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