Dollar falls into correction for the first time in years: The U.S. dollar has fallen into a correction, down more than 10% from its prior 52-week high. That ends more than a 2-year streak without this kind of a drawdown. Sentiment is sour, as falling real rates have pushed pessimism to an extreme. But that hasn't been a good reason to expect a lasting turn.

Short bets fall to 6-year low: Shares sold short against NYSE securities fell to a 6-year low during mid-August. That's more than 10% below the long-term trend in short interest. Stocks have shown below-average returns when short interest was low, especially this low.

Pressure cooker: Speculative activity in the options market has reached never-before-seen heights and doesn't show any sign of slowing. This is thanks in large part to stocks like Apple and Tesla. While traders are buying short-term calls to goose their accounts as much as possible, somebody has to manage risk on the other side. That's a big reason why we're seeing the Nasdaq 100 climb 1% nearly every day, but the VXN "fear gauge" is rising along with it. This is common in commodity markets like oil and gold - it's nearly unheard of in equities. Since the inception of the VXN, it has hit a 30-day high as the Nasdaq 100 hit a multi-year high only twice before, on January 9, 2006, and October 30, 2007. Both led to pullbacks in the NDX over the next couple of months, for whatever that's worth in this market.

Bottom Line:

• Weight of the evidence has been suggesting flat/lower stock prices short- to medium-term again; still suggesting higher prices long-term
• Indicators show high optimism, with Dumb Money Confidence above 80% with signs of reckless speculation during what appears to be an unhealthy market environment, historically a bad combination, though it's easing somewhat and so far the risky conditions have failed to lead to any weakness
• Active Studies show a heavy positive skew over the medium- to long-term; breadth thrusts, recoveries, and trend changes have an almost unblemished record at preceding higher prices over a 6-12 month time frame
• Signs of extremely skewed preference for tech stocks neared exhaustion by late June, especially relative to industrials and financials (here and here)
• Indicators and studies for other markets are showing less consistent forward results, though it's not a great sign for Treasuries that hedgers are net short and optimism on metals recently became extreme with concerning 100-day analogs, with "perfect" breadth among miners recently dipping a bit.