Monday, August 2, 2010

Are the markets overbought right now?

If it seems like just last week that we were checking whether the markets are overbought or not, it is because it WAS only last week that we were checking whether the markets are overbought or not. The markets were way overbought after the action last Monday and the conclusion was that we would get either a severe pullback or a period of consolidation, and the latter is exactly what we got. After the big move up today, I figured it would be worth our while to go back to our trusty old McClellan Oscillator and see where do we stand now.























Well, here we go again. We have just entered the overbought territory on both the NYSE and Nasdaq McClellan Oscillators. Now that doesn't mean that one should sell all their longs and go short here. Anything but. The momentum is certainly with the bulls and overbought can very easily become more overbought just as oversold can become more oversold. What this means is, that one should exercise caution over here while opening new long positions and hey, it's never a bad thing to start taking some profits off the table! For complete analysis on how to play overbought markets, see here.

Here is the link to my daily market analysis in case you readers missed it.
Take care and good luck!

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