Sunday, September 20, 2009

S&P 500 Most Overbought Since 1983...BUT...

The S&P 500 ($SPX) as of 9/18/09 is trading 20.13% above its 200-day moving average. An extreme overbought reading, and its also the highest reading in this indicator since May 6, 1983.
A notable statistic, and one that supports the notion that the market has run too far to make new buys at these levels. On the nearterm, taking some money off the table is warranted and the theme of BUYING the DIPS remains.

What I find of interest about this statistic is that while 1983 was the first year of the big market liftoff that started in 1982, it was still the beginning of a multi-year bull market. Definitely NOT a good long-term sell signal.

Regardless of trying to nail the next short-term moves in the market, I think the market will continue to work its way higher into year-end and next year. I think it is likely that at some point we will reach those pre-Lehman levels of 1200 on the S&P 500.
*click on charts to expand images

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