IntermediateTerm Top

Good Morning. There are a number of factors that are lining up for an intermediate term top.
  • The market is maximum overbought on both a short and intermediate term basis.
  • There has been a long string of call buying that is usually seen at tops.
  • The Russell 2000 has been lagging during this latest leg of the rally.
On Thursday Pfizer closed its takeover of Wyeth , which had a $44 billion cash component. According to Chrles Biderman's book, Trim Tabs Investing, nearly half the cash gets put to work on the 5 trading days following the deals closing. As such I want to leave room for the possibility of some further upside. I am looking to move back into a net short position but being careful in picking my spot. At present I am long pharmaceuticals and short SPY.

2 comments:

Chaos! said...

Not sure I'm seeing your medium term overbought status. What is your metric? The 10 day A/D is middling.
I also don't see the difference in the call buying. While high, my numbers are similar to numbers in both Aug and Sept. I'm 1/2 size short here, but not convinced a top is imminent The fact that I'd like it to be imminent is probably my best indicator that it isn't!

Tsachy Mishal said...

Did you see the chart I posted yeterday from the Traders Narrative? It is of the CBOE equity 10 day moving average. The ISEE equity looks very similar.

The current rally started the day after the jobs report, which is exactly 10 trading days ago making the 10 day moving average of the advance decline line maximum overbought.