I thought I’d share this excellent summary of the current market environment. This was written yesterday by Don Worden, one of the founders of TC2000, makers of my favorite charting package. I think he gives a perfect description of what’s taking place in the market right now.
Not the Last Chance
The market greeted lackluster economic reports with a lively, upbeat day. The ability to ignore disappointment is one of the most reliable indications of technical strength. Of course, this market continues to punish short sellers, while sucking in those who think they’re going to miss the whole bull market. This keeps pushing it up short term.
Some people are comparing the degree of overbought with 1999, when it was difficult indeed to find nice, convenient pullbacks to buy into. But there is an obvious big difference. In 1999 we were high on the ladder. Anybody could see that.
Now, we are low on the ladder. The market is not climbing into the stratosphere. It is trying to claw its way out of a basement. It is MUCH MUCH closer to the bear market low than the high of the late-90s bull market. Look at a weekly chart of any of the three major averages and you cannot help but see that for almost three quarters the market has been in a lateral trading range.
For the most part, it’s not a convenient time to buy. But neither is it the last chance. There are many individual stocks that are overextended at first, second and third glance. The main thing is not to get caught chasing them. Because I think you’ll be able to get many of them at significantly lower prices. -DW
