Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold Price Trend Forecast into 2021, Is Intel Dying?, Can Trump Win 2020? - 20th Oct 20
Gold Asks Where Is The Inflation - 20th Oct 20
Last Chance for this FREE Online Trading Course Worth $129 value - 20th Oct 20
More Short-term Stock Market Weakness Ahead - 20th Oct 20
Dell S3220DGF 32 Inch Curved Gaming Monitor Unboxing and Stand Assembly and Range of Movement - 20th Oct 20
Best Retail POS Software In Australia - 20th Oct 20
From Recession to an Ever-Deeper One - 19th Oct 20
Wales Closes Border With England, Stranded Motorists on Severn Bridge? Covid-19 Police Road Blocks - 19th Oct 20
Commodity Bull Market Cycle Starts with Euro and Dollar Trend Changes - 19th Oct 20
Stock Market Melt-Up Triggered a Short Squeeze In The NASDAQ and a Utilities Breakout - 19th Oct 20
Silver is Like Gold on Steroids - 19th Oct 20
Countdown to Election Mediocrity: Why Gold and Silver Can Protect Your Wealth - 19th Oct 20
“Hypergrowth” Is Spilling Into the Stock Market Like Never Before - 19th Oct 20
Is Oculus Quest 2 Good Upgrade for Samsung Gear VR Users? - 19th Oct 20
Low US Dollar Risky for Gold - 17th Oct 20
US 2020 Election: Are American's ready for Trump 2nd Term Twilight Zone Presidency? - 17th Oct 20
Custom Ryzen 5950x, 5900x, 5800x , RTX 3080, 3070 64gb DDR4 Gaming PC System Build Specs - 17th Oct 20
Gold Jumps above $1,900 Again - 16th Oct 20
US Economic Recovery Is in Need of Some Rescue - 16th Oct 20
Why You Should Focus on Growth Stocks Today - 16th Oct 20
Why Now is BEST Time to Upgrade Your PC System for Years - Ryzen 5000 CPUs, Nvidia RTX 3000 GPU's - 16th Oct 20
Beware of Trump’s October (November?) Election Surprise - 15th Oct 20
Stock Market SPY Retesting Critical Resistance From Fibonacci Price Amplitude Arc - 15th Oct 20
Fed Chairman Begs Congress to Stimulate Beleaguered US Economy - 15th Oct 20
Is Gold Market Going Back Into the 1970s? - 15th Oct 20
Things you Should know before Trade Cryptos - 15th Oct 20
Gold and Silver Price Ready For Another Rally Attempt - 14th Oct 20
Do Low Interest Rates Mean Higher Stocks? Not so Fast… - 14th Oct 20
US Debt Is Going Up but Leaving GDP Behind - 14th Oct 20
Dell S3220DGF 31.5 Inch VA Gaming Monitor Amazon Prime Day Bargain Price! But WIll it Get Delivered? - 14th Oct 20
Karcher K7 Pressure Washer Amazon Prime Day Bargain 51% Discount! - 14th Oct 20
Top Strategies Day Traders Adopt - 14th Oct 20
AMD is KILLING Intel as Ryzen Zen 3 Takes Gaming Crown, AMD Set to Achieve CPU Market Dominance - 13th Oct 20
Amazon Prime Day Real or Fake Sales to Get Rid of Dead Stock? - 13th Oct 20
Stock Market Short-term Top Expected - 13th Oct 20
Fun Stuff to Do with a Budgie or Parakeet, a Child's Best Pet Bird Friend - 13th Oct 20
Who Will Win the Race to Open a Casino in Japan? - 13th Oct 20
Fear Grips Stock Market Short-Sellers -- What to Make of It - 12th Oct 20
For Some Remote Workers, It Pays to Stay Home… If Home Stays Local - 12th Oct 20
A Big Move In Silver: Watch The Currency Markets - 12th Oct 20
Precious Metals and Commodities Comprehensive - 11th Oct 20
The Election Does Not Matter, Stick With Stock Winners Like Clean Energy - 11th Oct 20
Gold Stocks Are Cheap, But Not for Long - 11th Oct 20
Gold Miners Ready to Fall Further - 10th Oct 29
What Happens When the Stumble-Through Economy Stalls - 10th Oct 29
This Is What The Stock Market Is Saying About Trump’s Re-Election - 10th Oct 29
Here Is Everything You Must Know About Insolvency - 10th Oct 29
Sheffield Coronavirus Warning - UK Heading for Higher Covid-19 Infections than April Peak! - 10th Oct 29
Q2 Was Disastrous. But What’s Next for the US Economy – and Gold? - 9th Oct 20
Q4 Market Forecast: How to Invest in a World Awash in Debt - 9th Oct 20
A complete paradigm shift will make gold the generational trade - 9th Oct 20
Why You Should Look for Stocks Climbing Out of a “Big Base” - 9th Oct 20
UK Coronavirus Pandemic Wave 2 - Daily Covid-19 Positive Test Cases Forecast - 9th Oct 20
Ryzen ZEN 3: The Final Nail in Intel's Coffin! Cinebench Scores 5300x, 5600x, 5800x, 5900x 5950x - 9th Oct 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Stock Market Staying Overbought.....Making Sense Of It All.....

Stock-Markets / Stock Markets 2011 Jul 06, 2011 - 04:50 PM GMT

By: Jack_Steiman


It's not often you stay this overbought in a market on the short-term charts. There have been many attempts to sell things off, but once the RSI's get under 70, the buying starts right back up. This is only a once in a long while occurrence. The reasons for it are simple really. You're in a primary bull market until we can lose 1249 on the S&P 500 with some force. The bulls were able to defend this level a few times, and they have now cleared back over the critical 50-day exponential moving averages. Once you clear back over this critical resistance level turned support, the bulls get more aggressive on the buying due to the feeling of insurance that the 50's will hold. Only if they got taken back again by the bears would the bulls get less aggressive. In fact, with the reality that the bears lost the battle thus far, the bulls are feeling pretty good about themselves, and thus, will get back in new plays any time there's some decent selling, or even if it's not that decent it seems these days.

It normally would have been very difficult for the bulls to take back those lost 50-day exponential moving averages, but it wasn't all that tough this time once the daily M's made their bullish crosses from well below the zero line. All of this said, we are overbought, and thus, a decent pullback can begin at any time and no one should be shocked, or surprised, if we fell roughly 2% from today's closing prices. It doesn't have to happen right away, but if it did no one should say I didn't see it coming, because you should be prepared for selling at any moment in time. Markets are healthier once they unwind back down from overbought oscillators, so in some ways, you should look forward to some selling to help set up better entries on new plays. So while things look good overall, the market would be better served with some selling to unwind, while at the same time you have to feel good about the bullish behavior we are currently experiencing.

So where are the headaches in this market? Look no further than those horrific financial stocks, which gave up their recent breakouts over their 20-day exponential moving averages in many leading stocks. Bank of America Corporation (BAC), and especially JPMorgan Chase & Co. (JPM), were just terrible today. Both had easily cleared those critical resistance levels at the 20's, and after a few days above, gave it all right back with hesitation. A big gap down to put those stocks back in poor shape, if not a bear market. Not only is it bad to lose recently gained 20's, but how they lost them today is ominous at best. A large gap down that never recovered, even when the market turned up appreciably today after gapping down a drop at the open.

Those stocks just don't want to be owned for any length of time by the big money out there. I can't say I blame them with all the bad garbage on their books, but the fact that they had cleared and then lost right back, big resistance turned support is not a good sign for these stocks on any time frame. The best advice I can offer is to basically stay away from these stocks and focus your energy elsewhere. Do what feels right to you, but these stocks just can't seem to get out of their own way.

What is interesting is how the market is finding enough fear each and every day to keep the markets from falling too hard. For example, notice how every morning for the past few days to a week has some extreme high readings in the put-call ratio. Quite high with readings at 1.30, and staying near there for most of the day, although it calms down some as the day moves along.

However, it has stayed over 1.0 basically all day for many days now, and this shows many don't believe in the rally and are trying to load up on puts for the big sell off. Either that, or many are afraid of the rally not lasting and are buying protection with put positions. If you're a bull you like to see doubt. There is definitely doubt amongst the masses these days, and that's a good sign that'll prevent the market from collapsing when we do sell. If we see lower put-call readings all day, then we know we're getting too complacent, and thus, we can then expect a much stronger selling period. For now, the doubt is still strong enough, although we could use some selling to unwind things.

The market as it is here says exposure is appropriate. It doesn't say full in is appropriate. Markets such as these demand respect. You don't want to over play your hand. Play with a thought of making some money, but not playing with greed. Greed will cause you to do too much. It's as simple as that. Take positions in plays that set up properly and offer some protection from too much down side action should the market sell some. There are good set-ups everywhere, but not every sector is healthy, while others that are healthy need a pause to refresh. Find places where things are set up with MACD's lower down and trying to cross up positive. Holding overbought if you have gains is fine, but buying new plays at overbought makes little sense. Go day to day respecting what's possible such as the jobless claims report tomorrow. If it's bad we could really sell down harder. The big Jobs Report is pre-market on Friday, so again, be involved, but not inappropriately so.



Jack Steiman is author of ( ). Former columnist for, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Sign up for a Free 21-Day Trial to!

© 2011

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules