Market Pauses in Overbought Territory

On Monday, the market began the day by rising, but then it began a decline over the noon hour. The market found support in the afternoon session and bounced up to close slightly higher.  

The Nasdaq gained +14 points (+0.34%) while the S&P could only rise +1 point (+0.09%). The Dow managed just +18 points (+0.11%). Volume was higher for the Nasdaq and S&P, but lower for the Dow, so today was somewhat mixed. 

The market recorded its 4th consecutive up day. Up volume beat down volume by 3-to-2 and advancers led decliners by the same 3-to-2 ratio. Breadth was mostly positive on the day. This was basically a sideways day, where the market swings up, then down, and ultimately ends about even on the day. It can be frustrating when trying to initiate trades.

Last Friday, the VIX hit a low of 10.73. This is lower than the March 2013 VIX that dropped to 11.05. The VIX is a contrarian indicator, and low levels reflect high market optimism (which can be bearish). Extremely low levels sometimes occur prior to a market downturn. However, the VIX is not a good timing tool; it represents conditions only.