I love you Vimeo updates and prefer to just the audio. While we have made new highs in the US equity indexes, it appears they are quite extended to the trend means which makes them prone to sharp pull backs in the short term. Would you not agree?

Eoin Treacy's view

Thank you for your valuable feedback relating to the video commentaries, and for this question sure to be of interest to other subscribers. 

The deep but short lived pullback in 2014 represented the first major inconsistency in what had been a rhythmically trending environment for more than two-years. It represents a clear example of “a consistent trend losing consistency at the penultimate high” which we talk about at The Chart Seminar. The volatile range that unfolded from 2015 lowered investor expectations for future potential and conditioned them to expect sharp pullbacks not least due to the effects of high frequency traders. 

The question on many minds right now is whether the breakout from that volatility-prone range is going to be sustained? There is no denying that a short-term overbought condition is increasingly evident on the major Wall Street indices. That’s exactly what we expect to see following a lengthy range since we define these congestion areas as explosions waiting to happen. The S&P500 is trading approximately 6% above its all-time peak and there is potential for a reversionary pullback. However a clear downward dynamic would be required to signal it is unfolding. In the meantime we have to give the benefit of the doubt to the upside and it is equally possible that a reversionary process starts from a higher level.   

The banking sector shows the clearest evidence of at least pausing following what was, by any definition, an explosive breakout.