OBOSS is a proprietary market timing system indicator that I created to signal when indices are over extended. OBOSS numerical readings alert investors that a change in trend is likely to commence.

* An extreme over bought signal warns investors to protect profits until the condition has neutralized. +2
* An extreme over sold condition indicates investors should be building new positions and adding to existing positions. -2
* A neutral condition indicates that the current trend should stay intact. -1 to +1

In extreme market conditions OBOSS gives investors an edge by keeping them in touch with the market extremes and keeps the average investor from being complacent about their portfolios. When OBOSS is used correctly it can protect profits in up trending markets and generate buying opportunities in down trending markets.

During a trend OBOSS stands as a reminder to stay with the current trend until an extreme signal has been given.

OBOSS indicates that the market is still in the lower end of overbought after hovering in extreme territory for over two weeks.

The big question is whether this is the start of the correction or a sideways consolidation before the next move higher.  After seeing at least 4 sideways consolidations this year with no corrections, odds seem to favor a real price correction.  There is no way to know what will happen so it's best to keep your mind open to either possibility.  If you've been protecting profits all the way up, you'll be in a good position to take advantage of a price correction.

This is a good time to be alert for weakness in the market, but give your winners room to run.  If the market moves very sharply to the upside, considering taking some profits.

OBOSS is at the lower end of extreme overbought territory.  There is still room for the market to move higher.  If you're waiting on the side lines looking to buy high quality stocks, consider being less aggressive with new positions.  Protecting profits is job #1.  Reduce risk on any sharp move higher.

OBOSS closes at extreme overbought levels for the second week in a row.

At the risk of sounding like a broken record... the market is unusually extended.

While we have seen extreme levels hold for two weeks in the past, this is not common for OBOSS readings.  The S&P 500 is about 12% higher than it's 200 day moving average which is also considered a rare event.

There will be a consolidation in the near future.  Consolidations come in as sharp price corrections or through extended periods of sideways price action.

Since we don't know how the market will consolidate it is always good to be defensive when the market gets this extended.  That doesn't mean selling your positions on the first extreme indication,  but it is good practice to lock in some profits as the market extends higher.

OBOSS levels higher than 2.5 is a very good indication of an impending pull back in prices.  This is a good time to reduce risk, close margin, and take profits by scaling out on moves higher.

OBOSS moved into the lower end of extreme as the market let off steam today.

There is still room for the market to move higher.  If you're waiting on the sidelines looking to buy high quality stocks, consider being less aggressive with new positions.

Protecting profits is job #1.  Reduce risk on any sharp move higher.

OBOSS continues to hover at extreme overbought levels.  OBOSS has been in extreme territory and signaling caution since May 3rd 2013.  Since that time the S&P 500 has climbed 2.3% and continues to make new all time highs.  In the past we have seen OBOSS hover in extreme territory for five to ten trading days before seeing a change in the market.

Considering that we are seven trading days into extreme territory there is a good chance that the opportunity to protect profits and reduce directional risk is coming to a close.  Do not let the market lull you into being complacent with the constant grind higher.

OBOSS levels higher than 2.5 is a very good indication of an impending pull back in prices.  This is a good time to reduce risk, close margin, and take profits by scaling out on moves higher.

OBOSS continues to hover at extreme overbought levels.  OBOSS has been in extreme territory and signaling caution since May 3rd 2013.  Since that time the S&P 500 has climbed 2.3% and continues to make new all time highs.  In the past we have seen OBOSS hover in extreme territory for five to ten trading days before seeing a change in the market.

Considering that we are seven trading days into extreme territory there is a good chance that the opportunity to protect profits and reduce directional risk is coming to a close.  Do not let the market lull you into being complacent with the constant grind higher.

OBOSS levels higher than 2.5 is a very good indication of an impending pull back in prices.  This is a good time to reduce risk, close margin, and take profits by scaling out on moves higher.

OBOSS is at extreme overbought levels.  There is always room for the market to move higher, but odds favor a pullback whenever OBOSS gets this overbought.  If you're waiting on the side lines, this is not the time to be aggressive with new positions.  Protecting profits is job #1.  One way to protect profits is to tighten stops on existing positions or scale out slowly on moves higher in the market.

OBOSS closed the week in extreme overbought territory.  This may have been a gift week where investors were able to reposition themselves to reduce direction risk while the market flashed several warning signs without going into a correction.

I received several questions about how quickly an investor should react to OBOSS alerts.  It's very difficult to time a top or a bottom in the market no matter what indicator you use, but OBOSS does gives advanced warnings when the market gets too far extended on one side or the other.  Typically it takes one to two weeks from the first OBOSS alert before the eventual change in trend, but it is always wise to consider repositioning your portfolio to be ready for the change in trend on the first alert in case there is a sudden shift in sentiment.  When OBOSS gets too extremely overbought we start protecting profits by setting stops, decreasing our directional exposure by removing positive Deltas, and reducing market exposure by slowly scaling out of positions on moves higher.  Shifting portfolios to be more defensive takes time so it is a good thing when OBOSS generates an extreme overbought reading and the markets continue to push higher allowing investors to reposition successfully.

The last time OBOSS was this extreme was the week of May 18, 2012.  Last May we watched OBOSS hold in extreme territory for over a week before the markets shifted from a downward bias to a very strong uptrend two weeks later.  We started positioning ourselves for the change in trend right away by finding buying opportunities, scaling into high quality stocks on the dips, and increasing our positive Deltas.  In other words, we increased our exposure to the markets on every dip from the first OBOSS alert until we were fully positioned for the ensuing uptrend.

OBOSS levels higher than 2.5 is a very good indication of an impending pullback in prices.  This is a good time to reduce risk, close margin, and take profits by scaling out on moves higher.

OBOSS is at extreme overbought levels.  There is always room for the market to move higher, but odds favor a pullback whenever OBOSS gets this overbought.  If you're waiting on the side lines, this is not the time to be aggressive with new positions.  Protecting profits is job #1.  One way to protect profits is to tighten stops on existing positions or scale out slowly on moves higher in the market.

OBOSS ripped further into extreme overbought levels.

Not much has changed from yesterday.  The markets keep pushing to new highs with lackluster participation which is a perfect recipe for a pullback.  It is not healthy when the markets get one sided and it's about as one sided as it can get right now.  We have seen higher readings in the past, but it didn't end well (2007).

This is a good time to reduce risk, close margin, and take profits by scaling out on moves higher.

OBOSS is climbing further into extreme overbought levels.

OBOSS levels higher than 2.5 is a very good indication of an impending pullback in prices.

This is a good time to reduce risk, close margin, and take profits by scaling out on moves higher.

OBOSS climbed further into extreme overbought levels.  OBOSS levels higher than 2.5 is a very good indication of an impending pullback in price.  This is a good time to reduce risk, close margin, and take profits by scaling out on moves higher.

Prepare to protect profits after today's gap opening.

OBOSS is indicating the market is overbought.

We are watching SPY 160.00-160.50 for potential resistance.  If you see a sudden rejection / shift in momentum near this price zone, be ready to protect profits.

There is still plenty of room for the market to move higher.  OBOSS doesn't normally get readings higher than 2.5, so consider taking some profits on any sharp move higher and adding back positions on small dips lower.

OBOSS is at the lower end of extreme overbought territory.

There is still room for the market to move higher.   The S&P is heading into uncharted territory which makes picking resistance levels tricky.  For now we are watching SPY 160-160.50 for potential resistance.

If you're waiting on the side lines looking to buy high quality stocks, consider being less aggressive with new positions.  Protecting profits is job #1.  Reduce risk on any sharp move higher.

OBOSS is indicating the market is overbought.  We are watching SPY 160-160.50 for potential resistance.

There is still plenty of room for the market to move higher.  OBOSS doesn't normally get readings higher than 2.5, so consider taking some profits on any sharp move higher and adding back positions on small dips lower.

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OBOSS is neutral.  Caution is advised as OBOSS doesn't give us a lot of clues while it is within the neutral zone.  Normally we review SPY's 50 day moving average to see if the market is trending up or down and trade accordingly.  Take trades with the trend while keeping in mind where OBOSS and the market have come from recently.  If the market is in the middle of a snap back rally, it may be time to let profits ride while keeping a tight stop on winning trades.  If on the other hand, the markets are pulling back from overbought levels in an uptrend, it may be time to look for upwardly trending trades.  SPY's 50 day moving average is a good indicator of the overall trend, but it does lag during reversals off oversold and overbought levels.  When this happens, look at shorter time frames (5, 10, and 20 day moving averages) and look for higher highs and higher lows or lower highs and lower lows in price for an indication that the trend might be changing.  This will help you find the best trades in a neutral market.

After a wild ride of horrid news and increased volatility OBOSS ended the week neutral.

Corrections normally come through time or price consolidations.  This correction started with a lower prices so now we are watching S&P support levels to give us an idea of how far this move has to go before bottoming out.

If the S&P can hold 1540-1542, we may see further time consolidation where prices trade range bound before building energy to test the old highs.

If S&P 1540 fails, we will look to 1530-1531 for the next level of potential support.  If that level fails, S&P could see a test of 1500 before this is over.

Caution is advised as OBOSS doesn't give us a lot of clues while it is within the neutral zone.  Normally we review SPY's 50 day moving average to see if the market is trending up or down and trade accordingly.  Take trades with the trend while keeping in mind where OBOSS and the market have come from recently.  If the market is in the middle of a snap back rally, it may be time to let profits ride while keeping a tight stop on winning trades.  If on the other hand, the markets are pulling back from overbought levels in an uptrend, it may be time to look for upwardly trending trades.  SPY's 50 day moving average is a good indicator of the overall trend, but it does lag during reversals off oversold and overbought levels.  When this happens, look at shorter time frames (5, 10, and 20 day moving averages) and look for higher highs and higher lows or lower highs and lower lows in price for an indication that the trend might be changing.  This will help you find the best trades in a neutral market.

OBOSS is neutral.

OBOSS is neutral.

We are seeing an elevated amount of volatility since last weeks OBOSS alert.  Calling a market top is the most difficult game on Wall Street and we don't claim to be able to do it with OBOSS, but higher then average volatility indicates a change in trend is a high probability.  Stay alert and protect profits.

Hopefully the OBOSS alert from last week gave you enough advanced warning to protect profits.

Look for support and potential opportunities to buy high quality stocks, but also keep in mind that OBOSS has not completed a full cycle from extreme overbought to oversold this year.  The markets are long overdue a full pullback.  This might be where the market rebalances and the cycle completes.

Revert to shorter time frames (5, 10, and 20 day moving averages) and look for higher highs and higher lows or lower highs and lower lows in price for an indication that the trend might be changing or support is building.  Wait for price to confirm that support is holding before adding exposure to your portfolio.

OBOSS is indicating the market is still overbought.

The churning price action today worked off some of the extreme overbought levels we saw earlier in the week.  With that said... keep an eye on volatility and unusual price action.  We are watching for signs that the market might stall as it pushes into the resistance zone tested yesterday.  Watch for SPY price rejection between 159.50-160.00

If you see a sudden shift in sentiment around this area, be prepared to aggressively protect profits.

OBOSS doesn't normally get readings higher than 2.5, so consider taking some profits on any sharp move higher and adding back positions on small dips lower.

OBOSS is at extreme overbought levels.

There is always room for the market to move higher, but odds favor a pull back whenever OBOSS gets this overbought   If you're waiting on the side lines, this is not the time to be aggressive with new positions.

Protecting profits is job #1.

Earlier in the day today we saw a move into the upper end of extreme and a small rejection around SPY's 159.50 resistance zone.  The market pulled back just enough off that resistance level to keep OBOSS from having a higher overbought reading into the close.

Consider reducing directional exposure in your portfolio and look for opportunities to reduce risk.

OBOSS is at the lower to mid end of extreme overbought territory.

There is still room for the market to move higher.  If you’re waiting on the sidelines looking to buy high quality stocks, consider being less aggressive with new positions.

Watch for a sudden rejection in price around SPY's 159-159.50 resistance area that could indicate this move is running out of steam.

Protecting profits is job #1.

Reduce risk on any sharp move higher.