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Something to think about


I am heading back to New Joisey (yeah, whad exit) in a few and wanted to pass along a quick thought.

There is a belief among traders and investors that this intermediate-term overbought situation in all the market indices has to be resolved by crushing the equity market. I am not so sure...

Many are just looking at the overbought intermediate-term readings in the context of the bear market. What if the market works off the overbought by going sideways like it did in December after the Asian Economic Crisis in the 4th quarter of 1998. The last time most overbought readings were this high was in 1998 midway...not at the end...of the market rally before a meaningful pause.

I don't know if it will work out that way, but the potential has to be thrown out there. I remember being on the FOX Network in October 1998 with a well expected economist who was calling for a depression, Fed problems, currency collapse, etc. The market made a huge move and reached extreme overbought levels but never looked back because of the liquidity.

I want to watch how this intermediate-term overbought condition is treated by the market in order to ascertain the direction of the next move.

I have learned many lessons over my career...and the best is to not tell the market what it should do because it really doesn't care what I think!

What are your thoughts here Kevin - did your readings get extremely high in Q4 1998?

No positions in stocks mentioned.
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