Monday, November 7, 2011

All Sectors Point to Overbought

According to Bespoke Investment we are in a very serious overbought situation in the S&P.   "The table below represents between two and three standard deviations above the sector's 50-day moving average, and moves into this range are considered extremely overbought.

With the recent run up in markets since the beginning of October it is no surprise to see some data that proves this out.  What does this mean for investors?  Tread lightly.  Usually October is one of the worst performing months of the year but this year just the opposite and enough to get the markets out of the red and into positive territory for the year.  Bespoke has indicated that this has been the 9th best month ever in the S&P 500

This week I added to my SDS position which is the leveraged inverse to the S&P 500.



Notice that most of the top returning months occurred in the 1930's?  I can't help but think of some similarities here with all of the volatility we have been experiencing and as I pointed out in a previous post that we could be having a bear market rally.

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