Oversold? Not yet.

Here is a chart of the S&P 500 ETF {SPY*}. A look at the period between the two sets of blue lines shows what markets look like when they are oversold on all of the time frames that we cover. If you look all the way to the right of the chart you can see where we currently trade. While we may have become oversold near term we are in no way close to these levels on the intermediate and longer term time frames. Last week's markets created significant technical damage to stocks and it is likely that a market top has been put in place for a foreseeable future. We are therefore working on the assumption that stocks have the probability to rally back to their resistance lines but will be unable to reach new highs until later this year. In short we are bringing the defensive team out onto the field and will be in a more capital preservation mode for clients over the next several months with respect to their individual risk/return profiles.

*Long SPY for certain client accounts although positions can change at any time.