Wednesday, January 7, 2009

Still Overbought, Too Many Bulls For Me, Still Looking for Pullback

Quick post this morning. As I read various blogs and news sites, I am really amazed by the sudden bullishness that is out there right now. It seems like everyone is now buying and that this market isn't going to stop for another month or so - maybe several hundred points higher on the S&P. I guess I am just a stubborn, stubborn guy, because I am still bearish and am still looking to short. I may continue to be wrong - I have been so far with my timing, but I think a pullback that could lead to something more serious is very close to happening.

I have talked about the overbought indicators ad naseum the past few days and I won't go over those again - let's just say they are even more extreme than Monday. Here's two other data points for you though that I though were interesting. Look at the Investor's Intelligence data (new data is due to come out soon, but I am using last week's numbers.) Right now, we have an equal number of bears and bulls out there. The last time this happened was back in mid-August, when the bulls actually outnumbered the bears. Guess what happened in mid-August? (August 11 to be exact) Just saying. Again, too much sudden bullishness for me.

Reading IBD last night, I also noticed that this market is racking up some distribution and that the IBD index (which is made of the leading stocks of this market) was actually down 1.1%. IBD sounded cautious on the state of this current rally and when they sound cautious, I pay attention.

Again, maybe I will be completely wrong and this market will take off another 5-10% without stopping to take a breath. I've been wrong before and I will be wrong many times in the future - it doesn't bother me anymore. As for me, I am still not buying and I am watching SVR, WIBC, WTW, MW, and EDU as possible shorts today on breaks of their 50 day moving averages along with DUG and SKF among others. Good luck, especially if you're entering longs here.

2 comments:

Charlie G. said...

I read a lot of blogs, and you were one of the most clearly seeing a pullback coming, though most traders were saying things were overbought, and were cautious.

My first kid is 3.1 years old, so I wonder if that 3ight months will make a difference in handling the newborn. Glad everything is well, and hopefully the Steelers can progress...

Mac said...

The more we go along, the better my son is doing. He is just a little "rough" with him still and doesn't understand that you must be gently with a week old baby, so we just keep the two away from each other for the most part.

I think the Steelers can win this week - I just hope the Ravens lose, even if it means going on the road for the AFC championship.