What would sir John say here?

DOESN'T FEEL RIGHT - So USD/JPY finally broke out to the upside and closed above 103.50. I had been looking for the major pair to hold below 103.50 on a daily closes basis, in favor of fresh weakness. Yet, the market had different ideas. Technically, the break and close back over 103.50 and push to fresh multi-day highs, opens the door for a potential bullish resumption towards 105.50. However, I am still having a difficult time reconciling a bullish breakout at the moment, with USD/JPY still tied to risk and risk looking like it could still roll over quite a bit. I will defer, as I have been, from establishing any positions at current levels, but it just feels like risk assets are still way too overvalued here and should be vulnerable to that long overdue corrective decline. Throw in a EUR/CHF cross that is also correlated to risk, but has failed to join in with the latest risk rally, and this makes the situation all the more perplexing. I will say that if USD/JPY races higher again today and intraday readings are screaming overbought, it will be hard for me to ignore taking a shot at selling the market, despite the latest bullish break. At the moment, it all comes down to the US equity market.

WHAT WOULD SIR JOHN SAY HERE? - The S&P is back to fresh record highs, and there doesn't seem to be anything that can derail this freight train. It is hard to ignore the famous quote from Sir John Templeton, who said “Bull markets are born on pessimism, grown on scepticism, mature on optimism and die on euphoria.....the time of maximum optimism is the best time to sell.” So have we reached that point of maximum optimism? It is impossible to tell. But with fewer and fewer bears out there and with many of these players throwing in the towel, as would be completely understandable at this point, one wonders if we actually have arrived at that tipping point. Technically, the longer-term S&P chart is still tracking in overbought territory and definitely warns of a significant retracement. The relative strength index on the monthly chart is showing a bearish divergence, as is the case with the weekly and daily chart. Though the price has been moving higher, to fresh highs, the relative strength index has not confirmed this strength and has failed to ascend to its own fresh highs. Again, this doesn't mean that we will roll over, but it does continue to keep me in the bearish camp, as foolish as this sounds. Elsewhere, emerging market currencies have performed quite decently in recent days, but overall, these currencies are still at risk for further weakness. I have been seeing some signs over the past 24 hours of a potential end to this EM FX rally, and should we see these markets back under pressure, it wouldn't be a stretch to also expect to see some profit taking in US equities and a pullback in USD/JPY. Let's see how it all plays out.