Sideways At Best

The market can get a little more overbought if it has an up day today. However, after that it would be maximum overbought with 9 of the past 10 days being up. Even during the historic rally off of the March 2009 lows when the market became maximum overbought it paused for a few days at minimum before resuming its run.

The market has gone up enough to start causing some serious performance anxiety for hedge funds, which have largely de-risked and are likely underperforming. But even if the market is headed higher there will likely be a better entry point once we work off this overbought reading. The upside should be limited for the next week or so.

6 comments:

Random Thoughts said...

too early in the morning dude. go back to sleep

nicasurfer said...

you see this capn!

http://pragcap.com/mutual-funds-are-all-in

Anonymous said...

money never sleeps

Tsachy Mishal said...

Random,
Tell that tom 16 month old son. Im happy to comply.

Tsachy Mishal said...

nicasurfer,

I pointed that out in a post last week. Here is what I wrote:

Since July cash levels have fallen to record low levels at mutual funds. It seems that mutual funds have been meeting withdrawals with cash.Cash levels are so low that further withdrawals will almost certainly need to be met by selling stock. Even if mutual funds have inflows they might use it to shore up their cash positions rather than buy stock.

Tsachy Mishal said...

I would point out that cash allocations at mutual funds move at a glacial pace and while it is an incremental negative it is not actionable on its own.