When the RSI dipped below 5 last week, the SPY market analysis said it was primed for a bounce — and that’s exactly what we got. The index rallied sharply, climbing back to the 20-period SMA, just as expected.
But that doesn’t mean the danger has passed.
Under the surface, several major warning signals continue to flash, and together they paint a picture of a market that may not be as strong as the price action suggests.
Warning Signs Are Adding Up
While the short-term rally looked healthy on the chart, the underlying indicators tell a different story:
⚠️ Hindenburg Omen Triggered
This rare technical warning appeared again, signaling internal market conflict as new highs and new lows spike at the same time. Historically, this often precedes periods of higher volatility or downside pressure.
⚠️ Buffett Indicator Deep in Overvalued Territory
The ratio between total market capitalization and GDP remains extremely stretched. This is one of Warren Buffett’s favorite valuation gauges — and it’s currently screaming “overvalued.”
⚠️ Shiller P/E Above 30
The CAPE ratio is still sitting at historically elevated levels, suggesting long-term valuations are rich relative to earnings.
⚠️ Institutions Are Selling Into Rallies
Perhaps the most concerning sign: aggressive institutional selling is showing up every time the market bounces. When the “smart money” keeps exiting strength, it typically means caution is warranted.
So… Will the Selling Continue?
That’s the key question this week — and we break it down in full in the FFR Trading Market Minute.
Are these signals pointing to a deeper retracement?
Or is this just another shakeout in an otherwise strong trend?
To get the full breakdown, including the exact technical levels we’re watching next, check out this week’s Market Minute video.