Will the recent rally last?

There really isn’t much to write about tonight. The markets held steady today and for the most part finished the day flat.

My how many are quick to jump on the bullish bandwagon. I am a range-bound trader (who also trades market extremes) and for the most part so it really doesn’t matter to me which way the market moves as long as my underlying of choice doesn’t move sharply in one direction.

Sure, the bulls have stepped up over the short-term, but the gap up yesterday put the major indices in a “overbought” state and typically a move like that is faded over the short-term. This could be the exhaustion gap that many traders have awaiting.

Furthermore, in many cases, the initial reaction after the jobs report is often faded, which is exactly what occurred today.

Of course, there are no guarantees in the world of trading(I think we already know that), but the probability of a short-term move (1-3 days) lower certainly look likely from where I stand.

The SPX is up roughly 7% over the last 8 trading days. Is that really sustainable? Did the “Santa Claus” rally come early again this year? Everything hinges on Tuesday when the Fed announces how many basis points they will lower interest rates. Stay tuned!

Have a wonderful weekend!

Overbought/Oversold for December 7, 2007

S&P (SPY) - 72.0 (overbought)

Russell 2000 (IWM) - 70.5 (overbought)

Dow (DIA) - 75.3 (overbought)

Nasdaq 100 (QQQQ) - 72.1 (overbought)

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