Giddy Bullishness is Near Term High Risk, Low Reward

So how overbought are stocks in aggregate? Here is a simple, aggregated RSI overbought indicator. We are nearing four standard deviations of stocks above their respective 14 day RSI 70 lines and at the highest level in three years as of Friday's close.

How giddy is current bullishness? Frothy. Yellow indicates a particularly high level of a complacent reading:

FEAR/SCARED	NEUTRAL	COMPLACENT/EUPHORIC
	Rydex Total Levered Bull/Bear Assets	Risk Appetite Index
	Rydex Beta Chase	NAAIM Survey
		Hulbert NASDAQ Sentiment
		ISEE Put/Call Sentiment – 10 day sma
		CBOE VOL Index (VIX) (10 day)
		Invest Intel Bull Ratio
		Hulbert Stock Sentiment
		Smart/Dumb Money Confidence
		Rydex Bull Flow Ry dex Ratio 1yr Stoch
		CBOE VIX Fear Premium
		CSFB FEAR BAROMETER
		AAII Bull Ratio

This is quite a poor, near term risk/low reward environment. All time new high leadership tends to correct at least twice whatever the broader market does. So I choose to sideline my book at times like these. Corrective rotations within an on-going bull market tend to last one to four days, be violent as complacent longs rush to the door at once, and bring high levels of protection buying as doubt emerges. This is classic "pause that refreshes" market action where enough of the wall of worry gets rebuilt to provide new bullish footing.

How's leadership acting? Lots are stalling or beginning to correct. These include VRTS (RR Trax or Tweezer Top bear reversal, DDD, SSYS, EMN, BBSI, AVG, and PERI. Some move higher in my left margin list, but the stalling action is noteworthy coupled with the RSI/sentiment froth I show above.

The bank index still looks solid with JPM leading the way, WFC the major laggard, and BAC in consolidation. The BKX bank index remains in a very bullish long term breakout and underpins. Zero degrees of scoliosis in the market's spine.

At this juncture, I am avoiding the feeling of being a bagholder given the excessive bullishness and overboughtness. Avoiding that feeling for the moment drives my mostly cash position. I much prefer to deploy cash on a pullback in relative strength leadership that bucks the dip or wait for signs that the market just wont correct and is going to make a larger blowoff move higher. Given the gains in the market this month, its serious overboughnesss, frothy sentiment, and the end of the month coming this week, I see profit taking risk/rotational correction risk too high for my capital.