Oct 18, 2010

Short-term: 3 yellow, 1 red – still overbought
Int-term: 2 green, 2 yellow – uptrend still in place
Stock targets: 75% swimming, 18% neutral, 7% sinking – still extremely one-sided

Updated the indicators for yesterday because market today is dropping. Unfortunately, the intermediate term indicators are now lagging so they don’t seem to be signalling. Maybe the market will drop enough for the short-term indicators to signal a trading bottom. And market breadth and sentiment is still extremely one-sided – which is a contrarian indicator. A slight deterioration over the last couple of weeks but nothing that is a signal. I wouldn’t short this market – but I wouldn’t buy dips unless something changes.

On the currency side, which has driven most of this upswing over the last six weeks, the euro is now extremely giddily overbought. Wouldn’t surprise me if a wave of bad eurozone news dominates the news cycle for a few weeks. Perfect time to manipulate the news cycle for it.

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