All of the major indices moved into overbought territory today. The upcoming shortened holiday week, which is also options expiration, should be quite interesting given the the recent rally into strong overhead resistance and the current overbought levels. Typically, this type of environment calls for a short-term reprieve. Could we see a double top forming in SPY. We shall find out soon enough.
I would also like to point out the seasonal trend that is upon us. MLK day, like most holidays has a tendency to trade higher ahead of the holiday on lower volume and trade lower on higher volume when traders return to their respective desks after the holiday. Seasonal trends have been inconsistent lately, to say the least, but given the current levels of the market my feeling is that we could see weakness after the extended holiday weekend.
OIH jumped over its most oversold level in well over a year. Many of you wrote in to thank me for making you aware of the oversold levels and I certainly appreciate the gesture, but there is no need for thanking me. You, the individual trader/investor pull the trigger all I do is try to make you aware of extreme levels when they occur in the market. I am just glad that the blog is providing many of you with worthwhile advice. Anyway, for those of you who mananged to buy calls yesterday ,the move over $3.50 today in OIH is quite the reward. Good job!
Oversold/Overbought levels for January 12, 2007
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SPY - 76.5 (neutral)
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DIA - 77.6 (neutral)
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IWM - 70.0 (neutral)
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QQQQ - 88.5 (very overbought)
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OIH - 40.9 (very oversold)
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Have a great night!
Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com