More Thoughts On The Overbought Reading

The overbought/oversold indicator that I use works based on the duration of a rally. A market that has been rallying for two weeks is short term  overbought. The reason this likely works is that after two weeks of fighting a move  most of those who will give up have given up.

I have been thinking about the current overbought reading as it has been approaching. One thought that crossed my mind many times was that many people were not willing to buy ahead of the Greek election. Maybe waiting a single day after the Greek election was not enough time to achieve the goal of getting the holdouts into the market, especially considering that we were intermediate term oversold.

I did not want to rationalize the overbought reading so I tucked this thought into the back of my mind. It appears that this thought may have had some merit. However, at this point I believe we are now overbought even considering the Greek election.

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