How much longer will this rally continue?

November 15, 2006 · Print This Article

All of the major indices are reaching multi-year highs which is causing a buzz among investors (and why not right?). The bearish indicators have been piling up for weeks now yet the bulls remain in control of the market. Fortunately, I never allow my market views, right or wrong, to interfere with the strategies I follow. My theory is trade using a proven system or use the Warren Buffet method. I prefer to use the latter in my retirement portfolio. Anyway….

All of the major indices are currently in a “very overbought” state which, in most cases, means short-term moves to the upside should be limited. Recently the market has sustained overbought levels for days so I will be paying close attention to how the market reacts around this area. One thing is for certain, if the market sells off and reaches an oversold level I will be tempted to buy some calls. The trend lately is that whenever the market reaches an overosld level buyers move back in immediately. I do think the next move lower could be a decent one, but as you all know I have thought this for the last few weeks.

RSI Wilder (5) for November 15, 2006