There is some concern the market is overbought on a short-term basis. Warren Buffett mentioned last Thursday on CNBC that the market is “more or less fairly priced now” and it is hard to find good values. More than 80% of the stocks we follow were trading above their 10-day moving average last Wednesday, a technical indication of overbought. Profit taking and the upcoming Federal budget negotiation with a September 30 deadline have contributed to increased selling pressure in the past couple of days.
Options order flow on Friday had a protective bias. There was increased put buying in the SPY (S&P 500 SPDR), XLF (S&P 500 Financial Sector) and EEM (Emerging Markets) ETFs. The expirations were primarily concentrated in October and December. Additionally, we saw increased buying of the VIX call spreads in October and November.
With the Delta Market Sentiment Indicator bullish, we are looking to put new money to work on weakness.