The market spiked up today and never looked back. This moved all of the major indices near overbought territory once again. If you you have kept up with my daily blog you know which way I think this thing is headed over the next few weeks. Now the time has come and we shall see if all of the historical precedents hold true.
I am going to repeat one last time the mid-term stats that I mentioned last week. I am certain that some of my daily readers will be happy this.
The first stat is one that I have repeated numerous times over the past month. I stated on October 12th that :
“Another interesting (and not often mentioned) statistic that I came across was that when the market had a strong September and October during the mid-term elections (4 year cycle) every single time the market experienced a dramatic sell-off during the middle of November. The scary thing was that the sell-off averaged 5% to 10%. This is certainly something that we will be watching as we move closer to the mid-term elections.”
Furthermore, the Commitment of Traders, ”a report published every Friday by the
Commodity Futures Trading
Commission (CFTC) that seeks to provide investors with up-to-date information on
futures market
operations and increase the transparency of these complex exchanges” as stated on Investopedia, came out with an alarming report. The report showed an increase in the commercial net short position to $39 billion. This is the largest short position among commercial traders since March 6, 2001. The market declined over 10% after the report in 2001. Couple this with the statistic above and the market could be in for some trouble over the next month or so.
RSI Wilder (5) for November 6, 2006
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SPY - 65.3 (neutral)
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DIA - 54.9 (neutral)
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IWM - 64.8 (neutral)
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QQQQ - 61.5 (neutral)
Andrew Crowder, Chief Investment Strategist,
www.crowderinvestments.com