A Trading Market

Coming into April I envisioned a rally into expiration that led to extreme bullish sentiment. Following that rally I thought we would see a meaty correction. Instead we saw a correction during this normally seasonally strong period that has turned sentiment negative. As a result I believe that we will now see a two way market.

I am a big fan of two way market as I prefer to buy weakness and sell strength. I believe this will be a good strategy for the next few months. Right now we are closer to being oversold so I am positioned on the long side. As the market becomes overbought I plan to trim positions.

3 comments:

Eric Hilf said...

What is your definition of "oversold" and "overbought"?

Tsachy Mishal said...

I use the 10 day moving average of the NYSE Advance-Decline line. The next time we will have a chance to be overbought is in a week.

When Will We Be Overbought said...

[...] As I wrote yesterday I believe we are in a trading market, where one can buy oversold and sell  overbought. The market will not be overbought until the  end of the day on Tuesday. This also happens to coincide with the end of strong seasonality. If we rallied through that period  it would likely be a decent place to make some sales. [...]