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I was running through my daily technicals this week, and what I found made me stop dead in my tracks.
After trading since 2000, so 25 years now, I’ve seen plenty of market extremes. But what’s happening right now with the S&P 500 (SPY) and Nasdaq represents some of the most dangerous technical outliers I’ve witnessed in my entire career.
We’re not just overbought — we’re in uncharted territory that’s screaming for a correction.
The Numbers That Have Me Concerned
Here’s what caught my attention…
We’re stretching over 60 bars above the 21-day moving average, which is pretty unusual for a daily time frame. That alone would be concerning, but it gets worse.
The 50-day moving average tells an even more alarming story. We’re sitting 250 to 300 points above the 50-period moving average, and that’s highly unusual by any historical standard.
Look, I’m not calling for a market crash here. But when you see technical readings this extreme, the market has a funny way of snapping back to reality.
And usually, it doesn’t ask permission first.
What I’m Positioning For
Based on these readings, I think we’re due for a correction. My base case is looking at a 4% to 5% pullback, but depending on how volatility plays out, I wouldn’t be surprised if we see 7% to 9%.
The tricky part? We’re still hitting new all-time highs, and the VIX just dropped to 15. On the surface, everything looks fine.
But that’s exactly when the most dangerous setups develop — when everyone’s comfortable and nobody’s expecting a pullback.
I’ve been through enough market cycles to know that when the technicals get this stretched, it’s time to start thinking defensively. The market doesn’t stay this far above its moving averages forever, and when it decides to correct, it usually happens faster than most people expect.
The bottom line? Enjoy the ride while it lasts, but don’t get caught sleeping when these extreme readings finally revert to the mean.
I’ll see you in the markets.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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