Wednesday, March 11, 2009

Did You Miss The Boat?

Did you miss the boat?

Don't worry I did too? Who could possibly see a one day 6% "pop" coming? The sentiment data suggested it was in there -somewhere!! - but it just doesn't tell you when. Like I stated in the article, "Putting A Bullish Signal In Context", the optimal time to buy is after 2 consecutive weeks of bearish sentiment. So I was on the sidelines too. No biggy.

But my point of this post is not to tell you that I actually follow my strategies, but to tell you that there is a good chance that we could have an opportunity to "buy the dip" as the market is short term overbought. What is that Bob Marley song? "Don't Worry, Everything Is Gonna Be Alright".

See figure 1 a daily chart of the QQQQ. The oscillator in the lower panel is our short term mean, reverting oscillator constructed from sentiment ($VXN, put call) and market breadth (up volume/ total volume, advance decline) data. The indicator is overbought to an extreme degree and while overbought can become more overbought, overbought extremes in the indicator in this bear market have typically signaled either a high in prices (vertical lines) or a period of consolidation (gray boxes).

Figure 1. QQQQ/ daily

Do I wish I was in buying the market on Monday at 3:59 pm? Sure. But it never works that way. The short term oscillator suggests a high likelihood of a pull back over the coming days.


Anonymous said...

This QQQQ indicator is coincident wiht the Ratio Put/Call of CBOE.
Both are indicating overbought, and, in the short place (a few days) the markets can fall down.

After the market can go up.

Congratulations for your page web.
It is excellent.

(Estos indicadores son coincidentes con el Ratio Put/Call del CBOE y podrían indicarnos caidas en el muy corto plazo (pocos días).
Después podríamos ver nuevas subidas, incluso por encima de las actuales.
Felicidades por su página web.
Es excelente.

Guy M. Lerner said...

The indicator use the put call ratio and it wouldn't surprise me; I am not a big oscillator fan

Thanks for the compliments on the blog; just trying to keep it simple; I enjoy the writing and trying to provide some degree of rigour to TA