A vulnerable market - doesn't appear to be astonishingly at risk, nor are technical indicators perfectly lined-up for a 'dive'. However if one views internals as topping in the past (such as volume peaks preceding price as often occurs, and is something I pointed-out decades ago), rather than now or in the future, then rallies in the Indexes can be deceptive.
An example is this most recent thrust; it was again short-covering plus an Oil-led rise that didn't have follow-through of significance. The distortion of the Averages (and by earnings) from normally (even technically smoothed) historical patterns is significant.
That suggests of course that this remains a yield-chasing central-bank-fueled affair, and little else. Yes analysts try to point to better business for technology (or Disney's decent numbers, despite fears about theme park attendance) as justification at this stage; but that overlooks the extended valuation existing regardless, given slow growth; and entirely the implications of any shift in the credit markets.
Most believe that credit markets won't shift dramatically anytime soon; as Washington and others prefer that not happen (they wanted the growth but painted themselves in a corner where they are dammed if they do, and dammed if they don't hike rates). In fact the floating of low-yield paper is incredible and reflects the 're-funding' going on in a number of countries, not to mention corporate offerings at extended durations.
This preserves a bit of the TINA perception; which is correct from the perspective of a manager who 'must' move money around; whereas it's counter-intuitive for any other participant, who would (and should) be loathe to invest for micro yield returns, while principle is at-risk. There's no perfect answer to this dilemma other than 'correction'.
Bottom-line: while all technical and monetary 'ducks' aren't perfectly lined-up; they are quacking a bit (range-bound high level); and that sustains our hit-and-run trading approach of shorting rally extensions. There is no reason to change this; and every reason to remain wary of something coming in to this 'theater of the absurd' valuation levels, that knocks-off this 'stability' range.
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