Overdone

The rally is now a full 30 trading days old and we are overbought in the intermediate term.
I know the chart above looks like there is still room. However, since this is a 30 day moving average in order for the line to continue higher we must get readings higher than 30 days ago. The readings that kicked off this rally were high and its quite unlikely that we will be able to do so. Especially considering that an up day today would make us overbought in the short term as well.

The American Association of Individual Investors survey is showing extreme optimism. The ISE Equity 10 day moving average is consistent with previous intermediate term tops as seen below.
However, some sentiment indicators are not there yet. Those include the Investor's Intelligence survey and Rydex. The CBOE 10 day moving average is not consistent with previous tops as seen below.
To sum it all up, an up day today would make us overbought in both the short and intermediate term. Some sentiment indicators are consistent with an intermediate term top while others are not. Overall the weight of the evidence is pointing to a market with more potential risk than reward, especially if we are up again today.

1 comment:

Anonymous said...

Good stuff as usual~ thanks.