This page has been archived and commenting is disabled.
Stocks Are the Most Overbought in Four Years
Stocks are now beyond overbought. The market ramped on Tuesday (the 17th straight Tuesday rally by the way) because traders are now playing for Tuesday rallies.
The financial media is looking for any and all reasons to justify the move, but the fact is that the market had rallied for 16 straight Tuesdays before… so why not a 17th time?
Behind this backdrop things only worsen. The divergence between stocks and the economy is growing rapidly. Stocks are now over 4% above their 50-DMAs. Anytime stocks have been this far above their 50-DMAs in the last four years we’ve seen a correction:
The overbought nature of the market is even more obvious when you compare the S&P 500 to its 200-DMA:
It is clear now we are in something of a blow off top. How long it will last is anyone’s guess, but investors are far too bullish given the fundamentals. The long, “risk on” trade is so lopsided it’s not even funny.
Maybe this time is different… maybe stocks will only go straight up forever. Maybe this bubble, unlike the last two, will not burst.
Or maybe it’s time to start prepping for the next stock collapse.
For more market commentary and insights visit us at www.gainspainscapital.com
Best Regards,
Graham Summers
- advertisements -
When reporting that the DOW had closed over 15,000, the local news lady said, with a perfectly straight face, "Analysts attribute the recent rally to investor confidence due to the strong growth of the economy." I went "PFFFFFFT" so loud I think I coated the TV screen with spittle.
I only too well remember when they said "stocks never go down" right before the internet bubble burst...man was that bloody.
I only too well remember when they said "house prices never go down" right before the housing bubble burst...man was that bloody.
I will only too well remember when they said "stocks never go down" in 2013...they will say again, "man was that bloody."
Yep that was a Millennium-bug bubble. In March 2000 FED started to "take back" some of the cash they injected over the Fear of what the Millennium bug might do. This will burst when FED hinting a change in Printing. Anyone¨s guess when that will happen - if ever....
"All-time-highs" is all I hear.
"XYZ stock up 98% in the past year!"
Over, and over, and over.....
Another indicator that is useless. The market is manipulated. The market is being driven higher because the Fed is doing it. They do not care about overbought - expensive - correlations- GDP - earnings - they dont care about anything. It is a backdoor way to funnel trilions in dollars to the banks to get rid of the problem from 2008. There is no exit plan that can happen but they can keep going for years if they need to. SP500 could be 2000 this year - since the Fed answers to no one and has unlimited ability to print up money they can simply just keep buying assets every single day no matter what the price.
I notice the 3:20 ramp started a few seconds early today.
Isn't this all from the guy that said the world was ending last summer? That Europeans would be eating cat food and their offspring? If you go back and look at what this guest author has said in the past, his predictive ability is pretty low.
Sell when it's the most overbought in 30 years. Yeah, that's it.
sunny
I think the big diffence between now and a few months ago is that the economy has begun to erode where before it was just crappy but hopeful. Between the Obama tax hikes, Obamacare, and the new Cyprus banking model, the macro has begun to dteriorate. Where before a banking crisis was off the table, it is now the main course once more. All real selloffs are banking crisis/panics.
I do find it humorus that the big ramps always take place just as the fundamentals go completely down the toilet. The street is always trying to get people in to unload on. The market reminds me of AAPL after Jobs died and they started losing market share.
I greened ya, Quin, but with one caveat- I've seen the ramps (and PM takedowns) begin just before the bad news breaks, which makes it even more obvious.
Obummercare will have to be cancelled or they're fooked. Hands off the 401ks, too.
Why sell now? The full faith and credit of these United States of Amurika are standing behind that market.
Really. Stop laughing. I'm serial.
And the BOJ, and Swiss, and China, and the ECB,......... Everyone is pumping with the pedal to the metal. What could possibly go wrong?
'Come on sir....surely there's room for just ONE wafer-thin mint?' Mr. Creosote - clip - YouTube
So what if stocks are overbought? It seems even more money is giong to be pumped into stocks anyway. So go ahead and sell if you want to. I suppose I could sell too and put my money in a savings account, and collect all that wonderful interest they pay these days. Or I could buy gold and silver. But when you're a capitalist, you like to see some growth, even if you are fully aware what's behind it.
Yup. Choices getting fewer and fewer.
Capital flow trumps macro....well, until it doesn't.
http://dealbook.nytimes.com/2007/07/10/citi-chief-on-buyout-loans-were-s...
DavidC
Overbought? The money whores on CNBC tell us everyday how cheap the market is.
If there is a God in heaven, he will stop QE. Then we'll see what these scumbags have to say.
I think they mean 'Cheap, like a gussied-up whore'.
There is no god in heaven to stop jack fuck-all I guarantee it.
Oh down-vote eh? That's all you've got? Well you go sit around and wait for a cosmic sheriff to come stop QE, I myself don't believe in fantasies. No 'Messiah' is coming to bail you out, again I guarantee it!