Tuesday, February 26, 2008

Overbought - Oversold

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Finally, we have got above the upper trend line (see my NASDAQ 100 Chart post) . Maybe, not far above on the NASDAQ 100, but S&P 500 and DJI strongly overrun this line. The next sensitive line is February 1, 2008 high. In spite of the constant media pressure about recession the S&P 500 and DJI indexes already have recovered about 8% from the bottom of the January 23, 2008. The NASDAQ 100 is still behind.

The last 2 session we had strong move up. My indicators that I refer in my previous posts are still bullish and point to the possibility of the further up move. Yet, there is a few factors that make me cautious by pushing me to watch the charts more closely over the next couple of days. The main point that makes me worry is today’s high positive MVO(5,25, 3) which reveals the high volume surge to the price move up. The last time we saw high positive MVO on February 1, 2008 right before 5% drop. Yet, the today’s volume surge is somewhat lover and not so strong (MVO is smaller than January 30 – February 1, 2008 MVO). In addition we do not see the high MVO on the NASDAQ 100. So, in general there is still potential for up-move.

The intraday indicators (15-day chart) show some overbought levels by pointing to the possibility of the slide. 60-day chart indicators are at high levels and could become oversold as well.

The best confirmation of the up-trend would be when we start to see that the stock market ignores intraday overbought indicators by continuing moving up or react on them with small correction and show stronger reaction on the weaker oversold indicators.

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