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Well, we clawed closer to the all time S&P high today. The countdown is now about 20 S&P points. Since the year started the S&P is up about 130 points and the DOW is up about 1.300 points. Amazing. Many feel we are overbought, the technicals also confirm that.
The technical playbook says that you buy things (the market or individual stocks) when the RSI (relative strength index) is around 30. It gets overbought at 70. Also, as far as stochastics goes, you buy at 20 and sell at 80. Right now the daily RSI for the SPX is 69 and the stochastic reading for daily SPX is an off the chart reading of 98.50. Now keep in mind that these readings can stay overbought, but it is something you want to watch when thinking about a big purchase up at these levels.
However here’s the rub and maybe the rationalization for even higher prices between now and months end. We are either going to have a fast and furious correction or a move higher that could just amaze everyone. Why?
There are two weeks left to the end of the month and the first quarter. Because everyone has doubted this rally, not many are long yet. Believe it or not, many have been on the sidelines waiting for that correction that never came. They are praying and begging for a 5% pullback so they can get long.
Should the market hold its water here, there is a shot that we rip to more highs as hedge funds, pension funds, insurance companies and banks buy aggressively as they chase performance. They will not want to be left behind. Performance anxiety can be a great motivator.
Anyway, that is one scenario and n0 one knows how it will end up. Only time will tell.
See you tomorrow.