Waiting for the Last Buyer to Get In . . . . January 18, 2013
Posted by Tom in Thoughts.Tags: investing, market analysis, market commentary, technical analysis
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What could possibly go wrong? The markets are doing well world-wide . . . but “How long can this go on? Lord I’m so tired!” (apologies to a song whose lyrics I partially remember)
The wisdom of old traders: “When the last buyer has bought, then the market will go down.” Now don’t get me wrong, this “overbought” condition could last for a while, but it will end. And then it ends, how it ends, will tell us a lot about just how strong the underlying market really is. Will it be just 3-5% or will it pack a whoop of +20%? The volume since the first of the year has been very modest, there’s been no buying frenzy . . . do they have to lure a few more in?
Here’s what I’m concerned about: The VIX (a measure of optimism / pessimism on near term options): very low, very over optimistic; Number of Stock Above their 40 & 200 day moving averages: at / near all time highs, very optimistic; Advance / Decline indicators: very optimistic; and (of course) the indicators below:
Price Strength pie chart above; a lot of green up there . . . very many of the S&P 1500 stocks are extended.
Money Flow pie chart above; same story, with many stocks in Accumulation mode right now.
So this could get ugly in a hurry if the market under pinnings are weak (which could be aggravated by a news item), or it could be mild. It is very unusual for the trend to continue at this pace for much longer. I am watching closely, especially market leaders, for signs of a reversal and tightening stops. As the British would say: “Wait for It !” Save those hard-won gains because any drop could be a great buying opportunity.
Have a good week. ………. Tom ………..
pie charts coursey of www.HighGrowthStock.com; used with permission
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