Time To Be Selective, SPY

The market has had a PHENOMENAL October so far .  In late September we were staring at the abyss, now we can’t manage to go down for more than 30 minutes.  But remember, the market goes up and down, not up or down. From the lows of October 4, the SP500 is up 13%, right back to the top of its most recent range-1120-1220ish.   The Q’s are up a whopping 16% since the October 4th low.  Whether this is healthy or not, or that this means the market is broken, its irrelevant.  Those who have missed this move, and believe me, many have, are now scrambling to make sure they don’t miss more of it (including me).  However, after such a big move in such a short period, you need to be very selective.  Don’t get caught buying a stock that is up 5-6 days in a row, wait for some price or time consolidation.  They are many stocks up 5 or more days consecutively.  For goodness sake, $INTC IS UP 9 DAYS IN A ROW, $PII up 10 days in a row, $HANS 9 days, $PNK 9 days, $NMM 9 days.  I’m sure some pro’s will look to fade some of these moves in the short term.

As far as some of the major ETF’s, they are in the same boat.  $QQQ is sporting an RSI-2 of 99, the $SMH RSI2 of 99.37, Nasdaq RSI2 98.45, $OIH RSI2 97.99.  All this means is; that in the very short term these ETF’S are extremely overbought.  Remember, time could very well take care of these overbought readings, it does not have to be a price pullback, even though that is very likely here.

NDX with RSI2 at the bottom, click to enlarge

The McClellan Oscillator is back to an extreme overbought level; check those dates against the SP500

Here is a 5 year chart of  stocks above their 20 day moving average, its at a level were you need to cautious in the very short term;

A big deal has been made lately about the Cboe total put to call ratio, and how it has been above 1 for a long time.  If you take the ratio at face value, anytime the ratio closes above 1, it means that more puts were bought than calls and that could be considered bullish, obviously with a contrarian bent.  Well on Friday it closed below 1, this is only the 4th time since 7/29/2011.  What this means to me is; that in this new world order, a reading under 1 means that people are finally embracing the rally, which is concerning after a 13% move in about 9 days.  Here is the chart highlighting the days that the cboe total p-c ratio has closed under 1 since July.

The bottom line is; you need to be very selective here and I would suggest waiting for a price and or time consolidation.


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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