There’s a lot of bullishness now that the Dow has passed 14,000, and although I see the market rising 21% this year, I think people are too complacent right now and investors should wait for a pullback before making big purchases.
Overbought Oversold Oscillator
Here’s my oscillator as of Friday. When the dark line is high that means we are overbought (and you should sell), when its low we are oversold (and you should buy).
This chart shows we have been overbought since just before Thanksgiving. Only twice has the market simmered down to the point of getting in — mid-December and around Christmas. I also wish to note that even though we’ve been “up” for a while, that doesnt’ mean we still can’t keep going higher.
Still, this is a long time to be overbought, and I’d wait a bit before getting more invested. If you’re a trader, its a good time to take profits.
DJIA
The highest monthly close for the Dow was 13,930 in October 2007. In January we closed at 13,860.
This chart shows daily closes for the Dow, and doesn’t truly reflect the long-term trend of the index. But even this chart shows the recent rally has been without much interruption. I think we need a correction,
Sharek’s Take
Through January the market was up 5% year-to-date. I think the market will close the year 21% higher, so I’m bullish overall. Still, I feel people are too complacent right now and there’s more greed than fear on the streets. I would wait before making a major investment in this market, wait for a pullback. If you’re a long-term investor I think you should continue to hold what you have. If you’re a trader, sell something.
