Stocks Overbought, But That’s Not Slowing Bulls Down

Steamrolled, that’s one way to describe recent action. The bullish beat goes on as does the rally. We’re much overbought but that doesn’t seem to be slowing bulls down and you just have to stay out of the way.

One thing’s for sure, the DeMark Sequential 9 count on many monthly charts (SPY (SPY) shown below) foretold that a change in direction was entirely possible. Given the oversold level of that indicator plus the extreme low RSI (Relative Strength Index) an epic bounce was in the cards.

Volume today was high especially on the NASDAQ while breadth remains quite positive.

Let’s look a further inside tech-land.

The government is too big. That means too much money, patronage, political favors (more money) and bad programs like Fannie (FNM) and Freddie (FRE). Corruption and scumbags like Rahm Emanuel per this story in Chicago Tribune are the end result. (Yeah, yeah, yeah….the GOP has its share of scumbags as well.)

The news is bleak and disheartening but the tape is downright cheery. Which matters more? For us it must be the latter although we’re intrigued by the accuracy of DeMark’s monthly indicator signaling a potential change of direction.

The Treasury sold $57 billion in bonds while the Fed bought $33 billion. The money from the latter is propping both bonds and stocks since what would the sellers do with the money? Buy bonds? Silly isn’t it? That money may be routed to trading desks where they (wink, wink) know what to do with it.

With the end of month upon us very soon and the G-20 meeting on tap, the window dressing is on the front burner. Be carful out there with markets overextended.

I’d say the efforts of authorities to “stabilize” markets are working; however, they haven’t “fixed” a thing that’s for sure.

Let’s see what happens.

Disclaimer: Among other issues the ETF Digest maintains positions in: GLD, DGP, DBP, DBB, DBC and USL.

The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward.

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