COME TO PAPPA

The year end rally is solidly underway and I would like to point out something here. Notice how the market is pretty short term overbought here. Even the bottom indicator, which is inverse to the others, with low readings being sell signals, is pegged at the sell point.

One of the most painful things to learn about trading is that overbought can get more overbought, with the reverse being true for oversold conditions. I have found that once an indicator gets into these zones, if the reversal does not occur immediately, the move generally continues. As a result, prolonged readings of overbought and oversold need to be ignored.

Eventually a correction will occur once this condition is established, but I have never found anything that is a stalwart indicator to tell me when this will happen. If I ever do I can promise that I will keep it to myself! For now just ride your longs for the year end markup.