We had a nice rally today and while Zweig Breadth Thrust has pushed into extreme overbought territory that’s about it. If you read yesterday’s post you know what I was looking for, but it didn’t happen. And that’s okay with me. I remain long UPRO and all I’m really looking for now is a good excuse to sell. If the markets want to go higher for a few more days or weeks, then that’s fine with me.
$SPX is now up 5.44% for the month/year when the usual yearly gain is about 8% or so. Anyone who thinks this rally leg is going to continue without hitting some rough spots along the way needs to have their head examined. But it is what it is until it isn’t, if you catch my drift.
Chart of $SPX showing that the RSI has now moved above 70, and it’s probably going to go higher. Just as there is a group of traders who will buy the market when the ADX crosses up through the falling -DI line, there is also a group of traders who will start to average out or just get out completely when the RSI pushes above 70. Add this to the fact that $BPSPX, $BPTRAN, & $SPXA50R are also flashing overbought signals and you’ve got a pull back just waiting to happen and coming to an index near you.
Just be careful here until we see how all of this shakes out. Don’t get swept up by the exuberati and froth-mouthed bulls.