Still Neither Here Nor There

I was hoping that the market would get maximum overbought and that bullish sentiment would get excessive. This would have likely led to a good selling opportunity. Instead the market declined before  this scenario could play out. Unfortunately we are nowhere near being oversold yet either.

I see little edge from my indicators in betting on the short term direction of the market. Rydex traders are way too bullish while we saw excessive put buying the past two days at the CBOE. I am getting mixed signals galore. Market participants are nervous about the election in France this weekend and today's employment report. These events will soon be behind us and hopefully this will lead to market participants making up their minds.

2 comments:

Brent Barber said...

Are you still looking for us to be overbought, even with the last 2 poor days replacing the ones being taken off the 10-day stats?

Tsachy Mishal said...

We will not get a good overbought reading. Since this is only the third down day we are far from a good oversold reading. However, we are very short term oversold so we should see a bounce by Tuesday at the latest.
The textbook way a market gets oversold is to go down a few days, have a relief bounce then go down for a few more days.