(I said extended oversold readings, when I meant extended over bought readings @ the beginning of strong up moves, the same does go for oversold readings in the beginning of strong down moves)
To expound on that and repeat some of it, everything is pointing to a pull back. Every indicator from MACD to the $vix points to a pull back. These are not to be taken lightly. @ the same time, price, volume, and time tell us the pull back may be a buying opportunity.
This market is changing it's posture and while this change happens traditional indicators may give us false readings. I should say we may read them falsely because the readings aren't false we just take the wrong signal out of them a lot @ these times. I've been talking about major overhead resistance in the $spx for a week or so now... Here:
With housing numbers picking up (existing home sales up 5%, number of houses on the market down 9%, median home prices up 2%) and financial stocks leading us higher the pull back looks like a buying opportunity.
None of this is to say the American economy is going gang busters, but it is to say that it's not as bad as it seemed only 60 days ago. The slowdown in China points to more Chinese easing, so, bad is good there. Europe is not completely out of the woods but paths leading out of the woods are widening. The Iran situation is of concern but even there we see some light. Recent German and UN security council statements point to openness to talks on Iran's nuclear program. It's not pretty but it is what it is. you can point to a bunch of reasons the market will go down but most if not all are priced in. Markets are a discounting mechanism, @ least that's what they tell me, and right now it's pointing up for the world economy. The stock market is anything but crowded here so the pull back shouldn't be too crazy. The old winners are giving way to new ones and so far financials are filling the bill. There's nothing more bullish in our markets than seeing the financials lead this market higher.
As always the longer the market goes without a pull back the harsher the pull back when it does come so buying those pull backs are tricky and one should maybe even wait for the market to turn up a bit before buying. If volume pics up during the down turn the volume should pic up even more when it turns back up, this will be a buy signal. And since not many are in the market any crazy down volume points to some short selling. Too much of that and reevaluation is a must. It goes without saying, but I'll say it anyway, a shock also changes everything... Oh, and remember traders, if it was easy traders everyone would be doing it... Happy hunting!!!