You may be watching the current market and wonder how much further the market can go up. I like to see the markets go up just like everyone else, but it can't go straight up. Recently I have been watching the market and it seems like this part of the bull run might be running out of steam. Its time for a moderate correction, there are three indicators that say it may be time to protect your portfolio.
The first indicator is the VIX. The VIX is referred to as the complacency indicator, it measures the cost of protecting your positions. When the market advances typically the VIX pulls back. Right now the VIX is sitting at 14.62 and the 52 week low is 14.27. Typically when the VIX reaches these levels it indicates a pullback is imminent. The second indicator is a saying. The saying is, "Sell in may and go away." Historically the summer time is the worst time to be in the market. Lastly, the current advances in the market have been on light volume. What this says to me is that there is not a lot of conviction in the advances the market is making. Also the market is sitting at technically significant levels so it seems that everyone is waiting to see whether the market will pull back or break out.
In closing I don't know where the market will move from here, but it may be a good idea to buy some puts or take some profits off the table and move into cash. I believe the bull market still has a long way to go, but a 10% could be close.
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