Short term overbought last week - next 3 months could be range bound consolidation

From the last post I hinted the stock market could start to rally soon. But the following week there was an one day 2% sell-off before the rally I was looking for finally happened. I also followed up in the comment section of the post that a medium term oversold bullish setup could be occurring too. So since then the stock market has gotten an impressive two week rally especially the Nasdaq. But the medium term indicators has gotten close to overbought for the New York Stock Exchange while the Nasdaq exchange is between neutral and overbought. So caution is warranted here.

As current, the stock market is short term overbought. I would think this occurrence would be like the same situations of the past 6 months... grind a little higher before stalling on the 3rd or 4th week. The problem, which I been stating for the past few months, is the 200 day moving average is going need to be retouched which this hasn't happen yet since 15 months ago. In my Nov. 13, 2013 post I looked back the last 30+ years of the SP500 going beyond 12+ months without retouching its 200 DMA and most went up to 15 months before getting a quick sell-off back down. I also illustrated in the 1996 chart it went up to 18+ months before selling off over 8% intraday before recovering back higher.

So whether the stock market can continues to grind slower higher, any move higher will be temporary as a quick move down is expected and any move lower will also be temporary. I expect to see range bound consolidation for the next few months. Risk has risen and I had reduced my positions to less than 50% and into less volatile stocks. Will continue to reduce positions and go into short term and day trade modes if risk continues to rise. I anticipate the stock market will eventually move higher at the 2nd half of the year.