« A breath-taking experience, Fri., Sept. 1, 2006, 12:59 PM | Main | Small caps lagging, Fri., Sept. 1, 2006, 2:29 PM »

September 1, 2006

A run to the top, Fri., Sept. 1, 2006, 1:34 PM

Two weeks ago this weekend I wrote (in WIR#33) that the S&P 500 was unexplainably powerful and looked capable of taking a run to the May cycle high. Some readers, thinking I had gone loco, were saying I had turned bullish.

No, all I was saying at the time was that prices of equities looked to be heading north and your shorts and puts might get hurt, and maybe you ought to consider letting your longs and put writes go a little longer.

This wasn't a crystal ball thing; I was just telling you what I saw. Traders don't fight the tape. There is no reason to fight; it's not our tape.

But the risks are still there. The RSI 7 for the S&P 500 is at 71 for the monthly, and at 66 for the weekly. The daily is at nose-bleed levels (above 78).


002n001.gif

002n002.gif

This is a good time to review your portfolio to look at RSI 7 for the M-W-D for individual holdings. If you see a few in the 75 range across the board, I'm prepared to say that within the next six months you'll be able to buy those securities at a considerable discount to today's price.

So now, if you're a believer that prices ebb and flow, is the time to book some profits.

Posted by Posted by Bill Cara on September 1, 2006 01:34:22 PM | Category: Cara Today in the Market

Discourse

Advice to sell when the market goes higher is about as rare as an Alabama blizzard. Usually the cheerleaders chant: "Buy high! Sell higher!" And reloading to buy when the market goes down? Unthinkable in the CNBC World.

This post is a great supply-and-demand tutorial from Bill, a timely reminder that buying low and selling high is the way to really make money.

Posted by: Novalawyer [TypeKey Profile Page] at September 2, 2006 9:31 AM [link]