• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

Heading to Overbought

Let's look to last October as a template for the current market and see where we'll likely go this week.
By HELENE MEISLER
Feb 09, 2021 | 06:00 AM EST
Stocks quotes in this article: TLT

I still believe the market will get overbought by the end of this week. The Overbought/Oversold Oscillator has only barely ticked over positive 500, and, even if the market takes a breather Wednesday, I can see this indicator having one more fling to the upside -- and into the overbought reading.

Keep in mind that this is based on the 10-day moving average of the net of the advance/decline line. So we look back to see what numbers we are dropping. Two weeks ago this coming Wednesday will be the day the S&P lost nearly 100 points. On that day, net breadth was negative 2,100, so if we just do some back-of-the-envelope math, we know that breadth would have to be worse than that on Wednesday for the Oscillator to not go up. After that, it gets much harder for the Oscillator to rise. Thus we are overbought in the latter part of the week.

And, yes, I know my Saturday Twitter poll showed exuberance, but we still should get to an overbought reading; that's what happened in October. And I might even point out that for the second day running, the Daily Sentiment Index (DSI) for Nasdaq was 91, so it's possible the market doesn't wait for the end of the week. But if I had to guess, we get a down day and then one more rally try into the overbought condition.

Vexing VIX

Several folks have inquired about why I think the Volatility Index was not down on Monday. I could counter that question with a question: Why can't the VIX break 20, no matter what the market does? I honestly do not know. What I do know is that the 21 day moving average of the put/call ratio for the VIX has turned up. The last time it did so was in early September. We had a correction in stocks off of that and we saw the VIX rally.

October Redux

My template is still that October time frame. That's when breadth looked terrific, when the number of stocks making new highs increased, and when an unusual occurrence happened: The indexes sputtered and rolled over before the indicators did.

Right now breadth is terrific. The new highs have increased and the McClellan Summation Index is rising. All positives.

But keep in mind we're heading toward an overbought reading. Sentiment is getting frothy after getting despondent 10 days ago, and the VIX is back to the lower end of the range it has been in. I would also point out that the dollar was weak on Monday.

Finally, once again the chart of iShares 20 Plus Year Treasury Bond fund (TLT) has found itself at the lower channel line that has been a place to bounce from on every touch since last summer. There is no reason to think it won't enjoy another oversold rally.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Meisler had no position in any security mentioned.

TAGS: Investing | Micro cap stocks | Stocks | Technical Analysis | VIX |

More from Stocks

This Market Might Make Your Head Spin

James "Rev Shark" DePorre
Mar 8, 2021 4:40 PM EST

The rotation out of technology and into 'reopening' plays is driving the deceptive action.

'F' Is for $14

Mark Sebastian
Mar 8, 2021 2:53 PM EST

Ford as some serious FOMO behind it.

I Wouldn't Be Surprised if Palantir Technologies Worked Lower in the Weeks Ahead

Bruce Kamich
Mar 8, 2021 2:40 PM EST

Making recommendations about stocks that are thinly traded or are new issues is always a little 'dicey'.

How Does Dick's Sporting Goods Look Before the 'Big Game'?

Bruce Kamich
Mar 8, 2021 2:05 PM EST

Let take a look at the charts ahead of Tuesday's earnings release.

I'm Not Blowing Smoke With This 'Boring' Trade

Timothy Collins
Mar 8, 2021 1:46 PM EST

Given the rotation away from tech and growth, look for the market to at least make an effort at a breakout push here, taking PM with it.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:38 AM EST GARY BERMAN

    The INDU and DIA

    FIBOCALL: The INDU index and the DIA The INDU ...
  • 10:44 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    "The Challenge of Short-Selling"
  • 08:40 AM EST PAUL PRICE

    Recent Pick SpartanNash (SPTN) Raised Its Quarterly Payout by 3.9%

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login