It is funny how the "news" fits the market's need for news. The market is short term overbought – the small caps however are very overbought. I am using the IWM ETF below since stockcharts.com doesn't show gaps properly on indexes – in this case the Russell 2000. We have two entire candles on the IWM outside the upper bollinger band. I went back through 2009 and I could not find a similar occurrence – there are partials (i.e. the R2K was partially over the upper BB the three days after Draghi said "whatever it takes" in late June/early July) but not a point where you had two full days where even the bottom of the candle is over the upper BB. Since I posted that comment on twitter an hour ago the IWM has fallen about 60 cents. Coincidence? I think not. If not this news there would be something that would cause this to rest.
Does this mean we are going to have a major selloff? It need not mean that. Heck we could gap up tomorrow on a "super duper" jobs report. It just means until there is some rest and we at least see the Bollinger band range envelop the index again it's tough to make a lot of upside progress. And risk reward is skewing away from reward in the very short term.
Any securities mentioned on this page are not held by the author in his personal portfolio.