Yesterday's big rally took the market up to an obscenely high
short term overbought. We saw a pullback today, but the market
is still strongly overbought and vulnerable to more selling pressure.
Such would be the case even if bull market conditions ruled.
The market is at the gate of an intermediate term rally -- 6 -13
weeks -- that could carry the SP 500 up into a congestion / resistance
zone of 850 - 900 (as opposed to today's close of 806). However, the
trajectory up from the 3/9 closing low of 677 was such a rocket it
leaves about 5% further downside before it would enter onto a more
"normal" rally trajectory.
More conservative traders looking long may well hold out to gauge
if they can enter orders at meaningfully lower prices.
The market has moved sharply outside of a strong bear market
trajectory for the first time since the fall-into-crash kicked off after
Labor Day, 2008. So, for long side players this is the most interesting
rally in months and this suggests interest may stay high for a while.
The intermediate term breadth indicators I like still have the market
in oversold territory looking out several more weeks.
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