The scenario I laid out where we get a breakout of the range and sentiment turns excessively optimistic seems to be occurring. This will likely take some time as tops are generally processes. I want to see my sentiment indicators confirm my suspicions but the early indicators are pointing to excessive optimism.
At Rydex there is more than 5 times as much money in bullish funds as in bearish funds. That is close to an all time high. We are also seeing some extreme readings in option indicators, with the ISE equity closing yesterday at 215. I will be looking for confirmation from the sentiment surveys in the coming week.
I am not interested in catching the last few percent of a rally. That is where I believe we are. There should be better chances to buy stocks even if we go a little higher first. Have a great weekend.