Did You Miss The Boat?

Don’t worry I did too! Who could possibly see a one day 6% “pop” coming? The sentiment data suggested it was in there -somewhere!! - but it just doesn’t tell you when. Like I stated in the article, “Putting A Bullish Signal In Context”, the optimal time to buy is after 2 consecutive weeks of bearish sentiment. So I was on the sidelines too. No biggy.

But my point of this post is not to tell you that I actually follow my strategies, but to tell you that there is a good chance that we could have an opportunity to “buy the dip” as the market is short term overbought. What is that Bob Marley song? “Don’t Worry, Everything Is Gonna Be Alright”.

See figure 1 a daily chart of the QQQ (QQQQ). The oscillator in the lower panel is our short term mean, reverting oscillator constructed from sentiment ($VXN, put call) and market breadth (up volume/ total volume, advance decline) data. The indicator is overbought to an extreme degree and while overbought can become more overbought, overbought extremes in the indicator in this bear market have typically signaled either a high in prices (vertical lines) or a period of consolidation (gray boxes).

Figure 1. QQQQ/ daily

Do I wish I was in buying the market on Monday at 3:59 pm? Sure. But it never works that way. The short term oscillator suggests a high likelihood of a pull back over the coming days.

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