Posted on 09/14/2010 7:24:57 AM PDT by blam
The Market Is Short-Term Overbought Again!
Sy Harding
Tuesday, September 14, 2010. 9:15 a.m.
Looking back over recent months we can see how the extreme up and down volatility has continued, and how the sudden moves in both directions since the April top have also quickly whipsawed the expectations of Wall Street and the media, back and forth between “the recovery is on track” and “doom and gloom lies ahead”.
Right now we’re back to the consensus being that the economy is okay, the recovery on track.
However, looking back, the market topped out in late April almost in perfect timing with historical seasonality. By early June with the market down 13%, the consensus opinion was that we were in for a significant correction in the unfavorable season. The economic reports from April and May were mixed, but the focus was on those that were negative, and fears rose that maybe the recovery was stalling with the expiration of the home rebate program.
But then the market suddenly spiked up in a two week rally in June that pushed those negative thoughts aside. Everything was probably alright after all.
But after two weeks of rally had optimism back, the downside suddenly resumed to a new low in a two-week correction from mid-June to early July, that had the S&P 500 at a new low for the year, down 17% from its April peak. And back came all the gloom and doom talk, with the conviction being at the July low that not only was the recovery stalling, but a double-dip all the way back into recession was possible.
No sooner had that gloomy conviction taken over but the market surged up in July, and into the first week of August. And that rally had everyone convinced again that the low was in for the year, that although the economic reports were worsening, that would only force the Government to produce more stimulus programs, and that the market was merely climbing a normal wall of worry.
However, just about that time, five weeks ago, the market plunged again, and in three weeks produced the worst August in 9 years. And that brought an onslaught of fear again, especially with the typically negative months of September and October now up to bat. Archaic ‘indicators’ like the Hindenburg Omen, and Death Crosses, predicting huge declines, began spreading over the Internet and into financial publications, and even talk of a crash being likely in September.
But once again the market was short-term oversold beneath 21-day moving averages, and it launched into what has been another impressive short-term spike-up over the last two weeks.
And here we are again, with the negatives being ignored (auto sales collapsing in August, the ISM service sector Index declining to its lowest level since January, sales of machinery and computers suffering their biggest decline ever recorded in August, etc). Instead the few positive reports which have been either fractionally positive, or not as bad as forecasts, are being singled out to prove that this time the recovery really is back on track, and stock market volatility has ended. Some of the major indexes have broken fractionally above their long-term 200-day moving averages, intermediate-term MACD has triggered a buy signal on some of the indexes. Dow 12,000 here we come.
However, the major indexes are again short-term overbought above their 21-day moving averages to a degree that in normal times usually results in a decline at least down to the m.a., but in this volatility has been resulting in declines to back sharply below the m.a.
So be careful.
It’s like being on a roller coaster going very fast, and what you end up with is an upset stomach.
What a sham. Sounds like he’s talking about what number will come up next on a roulette wheel.
And what exactly is “the Market”? Front door bailout of Federal, State, and Local government “invested” pensions and insurance? .....
.......(and all those so called “non-profits” think tank beltways, beltway govt. contractors, so called “private banks”, so called “private” insurance companies, ??)
And .... if they are not successful in the “Market” tax the **** out of everyone else?
Market will stay overbought (means in uptrend) until November elections in anticipation of GOP victory.
When election is over, it will go down.
(Old Wall Street rule: Sell on good news.)
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