I would love to offer some wonderful insight into today's action but there really isn't much to offer. I just heard the question on TV on whether there was anything you could read into today's strength, the reporter said - "put simply no, but we will try anyway." Thankfully, I don't have to fill airtime so you will never get forced comments from me.
I did receive a great email asking if the market could "work off" the oversold condition by going sideways and therefore not bouncing before making another move lower.
The easy answer is yes. There are two ways that the market works off a near-term overbought or oversold condition. The first is by a rapid change in price and the second is by moving sideways for a period of sessions so that the lack of movement leads to a move back to neutral in the indicators. The market is now entering that period where if it doesn't move higher pretty soon, the odds are going to begin moving in the direction of outcome number two.
Either way, the loss of momentum on the intermediate-term indicators suggests that one should err on the side of caution. Even if the market does rally back to the highs of a few weeks ago, not enough time or price movement would be in place to change the direction on the weekly indicators. At this point, the best guess is for higher action followed by another move lower as we move closer to and into 4Q earnings reporting season, which begins in the third week of January.
Any questions or comments please feel free to contact me at firstname.lastname@example.org
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