{"id":1281,"date":"2010-03-08T01:55:12","date_gmt":"2010-03-08T06:55:12","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=1281"},"modified":"2010-03-08T01:55:12","modified_gmt":"2010-03-08T06:55:12","slug":"market-overbought-as-it-tests-52-week-highs","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2010\/03\/08\/market-overbought-as-it-tests-52-week-highs\/","title":{"rendered":"Stock Market Overbought As It Tests 52-Week Highs"},"content":{"rendered":"

The stock market’s bounce from oversold conditions has been as impressive as almost all other such bounces over the past year. I noted in early February that several technical indicators were pointing to a buying opportunity<\/a>. One of those indicators, the percentage of stocks trading above their 40-day moving averages (also known as “T2108<\/a>“), is now flashing an overbought signal. This indicator is typically considered overbought once it hits 70%. The chart below shows that last week T2108 shot right through 70% on its way to 80%.<\/p>\n


\n
\"T2108<\/a>
T2108 now in overbought territory<\/figcaption><\/figure>
\n*Chart created using TeleChart:<\/strong> <\/a>
\n<\/center>
\n<\/p>\n

Over the past year, the stock market has shown that it can remain overbought for long stretches of time, including a historic reading of 90% on T2108 last April<\/a>. So, while numerous climactic tops in January convinced me that those highs would hold for many months to come, I am now a little more circumspect after observing the strength of the latest bounce. In particular, cyclicals<\/a>, consumer discretionary, retail<\/a>, amongst other economically critical sectors and industries, have already hit fresh 52-week highs over the past two weeks or so. Even Goldman Sachs (GS) finally showed some life finally erasing most of its post-earnings losses with a 5.7% gain over the past two days. <\/p>\n

The S&P 500 is now within 1% of its 52-week and 17-month highs. Given the overbought conditions, I still expect some kind of retreat before a direct retest. If the overall bullish tone stays in place, this retreat will be shallow.<\/p>\n

Be careful out there!<\/p>\n

Full disclosure: long SSO puts, long GS calls<\/p>\n","protected":false},"excerpt":{"rendered":"

The stock market’s bounce from oversold conditions has been as impressive as almost all other such bounces over the past year. I noted in early February that several technical indicators were pointing to a buying opportunity. One of those indicators, the percentage of stocks trading above their 40-day moving averages (also known as “T2108“), is … Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[62],"tags":[65,226],"class_list":["post-1281","post","type-post","status-publish","format-standard","hentry","category-technical-analysis","tag-sp-500","tag-t2108"],"yoast_head":"\nStock Market Overbought As It Tests 52-Week Highs - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2010\/03\/08\/market-overbought-as-it-tests-52-week-highs\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Stock Market Overbought As It Tests 52-Week Highs - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"The stock market’s bounce from oversold conditions has been as impressive as almost all other such bounces over the past year. 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