July 28, 2017

Short-Term Post-Fed Reversal

I am keeping it fairly short tonight as my mother is in town visiting. Please do not hesitate to email me with any topics that you would like for me to discuss. I have already had a request for tax laws on options trading so I will be covering that next week. I would love to hear other requests, comments or ideas that will make your trading/investing more worthwhile. Now onto today’s comments.

After the best three day performance since November 2004 the major benchmarks traded in a fairly tight range and finished the day basically flat. The benchmarks were unable to work off the overbought conditions so I still anticipate that the market will experience a short-term decline over the next few days. Any moves to the upside should be limited and not sustainable at least until the market is able to work off the current overbought levels. 

Yesterday’s move was no doubt a pleasure for those who were siding with the bullish camp. As wonderful as the day seemed for the bulls, this type of price action usually does not bode well for the market over the short-term (1-5 days). As I stated yesterday (and several times in the past) the intial move following a fed release is usually reversed within a few days particularly if the move was greater than 0.5% in the S&P.

Overbought/Oversold levels for March 22, 2007

  • SPY – 77.1 (overbought)
  • DIA – 76.3 (overbought)
  • IWM – 74.7 (overbought)
  • QQQQ – 73.4 (overbought)
  • OIH – 78.5 (overbought)
  • GLD – 75.1 (overbought)

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Have a great night!