10/24/2011 Market Outlook (Overbought)

SHORT-TERM: EXPECT PULLBACK AS EARLY AS TOMORROW

Simple today, one word: Overbought!

Those who followed me for awhile should know, rarely I used the word overbought as title. If indeed, then it must be extremely extreme, therefore always a red day the next day. This time, however, let’s prepare for the exceptional exception, so, say, Wednesday would be the short-term top, while I certainly don’t expect huge up in the coming Tuesday and Wednesday. If interested, either you can search all my past reports by using overbought as key word or pay a little attention to this site’s new feature that the most related 5 topics will be listed at the end of every report (so this means you must skip the Chinese translation, jump to the real end of the report before the comment area), where generally the past reports with similar title will most likely be listed which I think should save you some time to do the search.

The last but not the least, let me make this very very clear again: Nowadays the market tends to go extremely extremely extremely extremely extreme before any reversal is possible, so you should beware that shorting now is very very very very dangerous, therefore is for aggressive traders only.

Now let me present my witness, why the market is overbought.

Actually I’ve already mentioned them in the 10/21 Market Outlook. Today’s huge up was enough to make my two ultimate weapons for watching overbought, NYMO and T2122, go extreme. Between them, as I mentioned before, NYMO is among those very rare signals that cannot be argued. Below are what NYMO and T2122 look like today. Since T2122 might not be extreme enough, so that’s why I didn’t say absolutely a pullback tomorrow (well, never did I say anything absolute), instead, I give bulls 2 more extra days (at the most).

The chart below combines NYMO and T2122 together. Highlighted in red, are the only 3 cases in the past 10 years when both reached an extreme level at the same time. Among them, indeed there’s a case the market rose for another 2 days and this why I kept saying above that I’d allow 2 extra bullish days until the Wednesday.

INTERMEDIATE-TERM: WE COULD SEE MULTIPLE WEEKS RALLY BUT MAINTAIN SPX DOWNSIDE TARGET AT 1,000

For why we could see multiple weeks rally, please see 10/14 Market Outlook for details.

For why SPX downside target at 1,000, please see 08/19 Market Outlook and 09/30 Market Outlook for details.

Chinese Transcript

SHORT-TERM: EXPECT PULLBACK AS EARLY AS TOMORROW

今天很简单，就一个词，超买了。老读者都知道，我不轻易用overbought作标题，如果用的话，一定是extremely extreme了，因此基本上第二天都会有pullback。就算我们这次是例外中的例外吧，那么最迟周三是top，而周二和周三大涨特涨的可能性并不大。有兴趣的话可以search我过去用overbought作标题的例子，或者使用本站的新功能，现在每篇报告的最后都会有related topic，一般标题类似的会被优先列出，这样就省的查找过去的例子了。最后再次强调一下，现在的市场不论牛熊，经常是extremely extremely extreme才有可能反转，所以目前做空是非常危险的动作，因此是for aggressive traders only。

下面看看为什么我说超买的证据。

其实我在10/21 Market Outlook里已经提了，今天大涨，我的两个看overbought的终极武器，NYMO和T2122就会超买，其中NYMO是不能argue的。下面就是今天NYMO和T2122的情况。可能T2122还不够extreme，所以我才没有把话说死，放出了两天的余量。

下面的图是把NYMO和T2122合在一起，这两个同时都extreme的例子，整个10年就3个例子，见红色高亮部份，其中就有又长了两天的，这也是我为什么把余量放到周三的理由。

INTERMEDIATE-TERM: WE COULD SEE MULTIPLE WEEKS RALLY BUT MAINTAIN SPX DOWNSIDE TARGET AT 1,000

For why we could see multiple weeks rally, please see 10/14 Market Outlook for details.

For why SPX downside target at 1,000, please see 08/19 Market Outlook and 09/30 Market Outlook for details.