On Tuesday, July 3rd, we had a climax buying event which was also the 3rd day of Stealth Distribution. $NYSI rose by 101 pts, $NYMO rose above its upper Bollinger Band, and Zweig Breadth Thrust pushed up to 65.83. Those indicators warned that we were headed for some kind of pull back, which is now under way. And just as we had a climax buying signal on the 3rd, we now need to wait for a climax selling signal before it’s safe to try and play a bounce lasting a few days. However, as long as the mad men at the helm keep coming in near the close to push the market higher, then we’re not going to get a climax sell signal. That doesn’t mean the market won’t bounce between now and then, but it’s just safer to wait for an extreme oversold day before putting any money at risk.
The easiest way to watch for an extreme oversold day is by watching $NYUPV from about 3:00 P.M. on. If from around 3:00 P.M. $NYUPV is down below 80 and remains below 80 into the close, then you can anticipate that many of the other breadth indicators will also push deep into oversold territory, as well. This may also happen at the same time that the RSI on the 60min charts is below 30 and dropping.
That’s what I’m waiting for and until then cash is king.