As we described in yesterday’s Monday Morning Kickoff (MMKO) — our market primer for the week ahead in the stock market and beyond — the market’s rally over the last three weeks has pushed all of the market indices, especially the S&P 500, well into overbought territory. Not surprising given the 9.4 percent move in the S&P 500 as of last night’s market close since February 11^th. The S&P 500 wasn’t alone, the tech heavy Nasdaq Composite Index climbed just over 10 percent, while the Dow Jones Industrial Average soared 9 percent over the same time period.

In examining several market indicators, including the NYSE McClellan Oscillator that we presented in yesterday’s MMKO and is updated below, and S&P Capital IQ’s Short-Range Oscillator hit a reading of 11.0 percent with yesterday’s market close, up dramatically from -4.4 percent on February 11^th. The rule of thumb with the S&P Short-Range Oscillator is the market enters overbought territory when the indicator crosses a reading of 4 percent, meaning the market now sits in significantly overbought territory at current levels.

The last time we saw these two indicators near current levels in early November 2015, the S&P 500 fell 4.1 percent over a period of several days spanning Nov. 2 – Nov. 13. 

Against that backdrop, we are making some moves with Tematica Pro this morning to preserve recent gains while add some protection for what is likely to be be a bumpy ride near-term. Much like insurance, it’s better to have such protection when you need it rather than be caught without it, especially when market indicators are sounding like “Danger Will Robinson! Danger!”  blasting from the robot on Lost in Space’s Jupiter 6.  Better to be safe than sorry.

Therefore, we are transitioning the following ETF positions to a “Sell” rating to preserve gains:

• Technology Select Sector SPDR Fund ([stock_quote symbol=”XLK”])
• Vanguard High Dividend Yield ETF ([stock_quote symbol=”VYM”])
• Consumer Staples Select Sector SPDR ETF ([stock_quote symbol=”XLP”])
• Utilities Select Sector SPDR ETF ([stock_quote symbol=”XLU”]).

We have also issued a “Sell” rating on the Facebook ([stock_quote symbol=”FB”]) April $110 call positionthat closed last night at $2.10 – well above our protective stop loss at $1.60.  

At the same time, we are recommending investors consider taking some protective measures, and that means a “Buy” rating on ProShares Short Dow30 ETF ([stock_quote symbol=”DOG”]) shares with a recommended stop loss of $20.50. We will also add ProShares Short S&P 500 (SH) April $22 calls that last traded at $0.24 and with a recommended stop loss at $0.15.

We realize former Power Option Trader subscribers may not own XLK and XLU shares and we would avoid them at current levels. We also realize that former Power Option Trader subscribers may not already own shares of ProShares Short S&P 500 ([stock_quote symbol=”SH”]) like former Power ETF Trader subscribers – SH shares are a buy at current levels given what we’ve said above.

*** Special Note: As the dust settles with these updated recommendations, Tematic Pro’s current Buy recommendations stand as follows:

Stock/ETFs

• ProShares Short S&P 500 ([stock_quote symbol=”SH”]), which are a Buy at current levels and have a $20 stop loss
• PowerShares DB US Dollar Bullish ETF ([stock_quote symbol=”UUP”]) shares, which are a Buy at current levels
• iShares Barclays 20+ Year Treasury Bond ETF ([stock_quote symbol=”TLT”]) shares, also a Buy at current levels
• Health Care Select Sector SPDR ETF ([stock_quote symbol=”XLV”]), are a Buy with a $58 stop loss
• ProShares Short Dow30 ETF ([stock_quote symbol=”DOG”]) shares with a stop loss set at $20.50

Options

• PowerShares DB US Dollar Bullish ETF June $25 calls, which last traded at 0.57 are a buy with a stop loss at 0.40
• ProShares Short S&P 500 (SH) April $22 calls that last traded at $0.24 and set a stop loss at $0.15.

Housekeeping items:

• Given the market moves, the ProShares Ultra Short S&P500 (SDS) April $22 calls and the Nike (NKE) July $65 calls we provided to Power Options Trader subscribers were stopped. The former is due to the market’s continued climb move higher last week, while the bankruptcy news at Sports Authority has weighed on Nike shares as well as Under Armour ([stock_quote symbol=”UA”]). Dick’s Sporting Goods ([stock_quote symbol=”DKS”]) reports its earnings today, and we’ll be watching to see if we should revisit a position in Nike.