The stock market, as measured by the Standard & Poor�s 500 Index (SPX) has been struggling this week.� It hasn�t been going down, but it�s been apparent that it was too overbought to go up much, either.� Then today, Fed Chairman Bernanke announced the de facto beginning of QE 3, which propelled financial assets of all sorts (except the U.S. dollar) to rally.�SPX moved 20 points off its lows; T-Bond futures soared more than two points, Gold rallied $60, and so forth.�You get the idea.
Can this be sustained?�Maybe for a few days (see the Market Insight section for some commentary on that), but this market is due for a breather.�Perhaps traders are reluctant to sell in January, for they don�t want to start the ball rolling downhill before they get the chance to record profits for what is a certainly a strong month for most.�
SPX itself is trading over 3 standard deviations above its 20-day moving average.� Granted, with actual (historical) volatility down to 10%, it�s much easier to be three standard deviations above the moving average, since the distance of a standard deviation shrinks when volatility does.� Still, this is an overbought indicator that has produced some sharp declines over the last year whenever SPX gets this �stretched.�
No comments :
Post a Comment