03/23/2009 Market Recap: Very Short-term Overbought

Now the market is very overbought in the very short term, and it may pull back in tomorrow morning.  Since CPC is lower than 0.8 again, 65% of the chance is to close in green according to 7.0.4 Extreme CPC Readings Watch.  Other short-term and intermediate-term signals are more or less overbought as well but not at extreme levels, so I am not sure if they will play out.  Based on the normalized CPC on 2.8.1 CBOE Options Total Put/Call Ratio, I still doubt the upside room of this rally.  On the other hand, in term of operation I will buy dip with no argument in order to hedge my short positions because the intermediate-term rally may last for a couple of days longer.

Take a look at two charts as follows which show why the intermediate-term rally could go further.

2.8.0 CBOE Options Equity Put/Call Ratio.  Finally we have a double confirming trend line.  However it may take some time should CPCE decisively breaks out this trend line.

1.1.4 Nasdaq 100 Index Intermediate-term Trading Signals.  NDXA50R at the bottom of the chart is very close to 80, and the level of 80 is a top even in a bull market.  Of course, this also means we need to be patient for a few days.

OK, now let’s see how overbought the market is.

0.0.3 SPX Intermediate-term Trading Signals.  Overbought in the intermediate-term as you can see, both NYADV and NYUPV have made a historical high.

7.0.1 Extreme NYADV and NYMO Readings Watch.  Short-term overbought on the following chart.  The last time NYADV stayed for 4 days at the overbought level, but this time it may not stay that long in my opinion.

1.0.3 S&P 500 SPDRs (SPY 30 min) and 1.0.4 S&P 500 SPDRs (SPY 15 min).  Over the very short-term, overbought all over the charts for all applicable indicators, therefore I believe the market will pull back in tomorrow morning.

1.0.7 NYSE - TICK (30 min).  TICK is too high which means the market may pull back in tomorrow morning.

1.3.7 Russell 3000 Dominant Price-Volume Relationships.  Here is the biggest problem with today’s rally, 1592 stocks price up volume down.  Anyway, who cares? He he.

7.0.7 SPX and VIX Divergence Watch.  For your information only, VIX is reluctant to go down while the stock market is flying high.  Nothing beyond that.