Tuesday, June 2, 2009

06.02.09 - Blowing Off Some Steam

As of last night, over 80% of tracked equity ETFs on ETF Rewind looked technically overbought. However, we are in an abnormally strong market, and patience should trump getting ahead of this tape without clear signs of a reversal.

At the mid-day, price on the major indices lies just below the downward sloping Volume Weighted Average Price (excepting the IWM and EFA). Internals are mixed, with a rising Tick, but down sloping AD line and nearly matched up/down volume. We have seen a series of lower highs and lows since the morning pop, however, so caution is indeed warranted for now.

Note also that the VIX is on the rise and Financials (XLF) are leading the retreat on dilution worries in spite of the outstanding pending home sales results. We may yet turn this around, but traders need to keep a close eye out at these extended levels.

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