Today marked the third straight day of tight range-bound trading in the S&P. Historically, when we witness this type of action in the S&P, weakness typically follows. Furthermore, the S&P continues to struggle with strong overhead resistance and the divergence between the small and large caps has been notable over the short-term. The list of short-term bearish indicators continues to grow.
Next week brings the beginning of the month seasonal bullishness and October happens to be stronger than most months. If the seasonal tendencies hold true (which they haven’t lately) as I stated over the past couple of days, any spike higher will most likely be short-lived. The move could be sharp and quick so be nimble. I will only start to become aggressive if the major indices, namely the S&P, move back into a “very overbought” position. Until then I will be parked on the sidelines. I can’t say it enough but patience is the key to long-term financial success. If I happen to miss a move here, well, I am obviously disappointed, but I also know that more opportunites will present themselves in the near future. Let the trades come to you. Don’t force the issue. Let probability be your best friend. Okay enough of that, have a wonderful and long weekend.
RSI Wilder (5) for September 29, 2006
- SPY - 70.8 (overbought)
- DIA - 68.3 (neutral)
- IWM - 41.6 (neutral)
- QQQQ - 61.3 (neutral)
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Andrew Crowder, Chief Investment Strategist