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Posts Tagged ‘relative strength index’

Caution: The Market Looks Dangerously ‘Overbought’

Posted by Larry Doyle on April 6th, 2010 8:48 AM |

Is the equity market overbought? Am I supposed to be allocating capital to the equity market after this enormous runup? Is there value in the market, or is this simply one massive momentum trade? Why is overall equity volume so light? Is that an indicator that the market is operating on borrowed time?

All great questions. If I had the exact answers and told you so, I’d be a certifiable liar. These questions can only be addressed on a relative basis. On that note, one of the best measuring sticks that I’ve always used in assessing overall market strength and direction is known as Relative Strength Index, or RSI. What is that? (more…)

Dead Cat Bounce

Posted by Larry Doyle on March 4th, 2009 3:00 PM |

The equity markets are up almost 3% today. Did we just put in a bottom? Can we at long last expect better price performance? Are we seeing a turnaround in the economy? Well, in Wall Street parlance today’s price action is known as a “dead cat bounce.”  I had mentioned a day or two ago that a short term RSI (relative strength index) had fallen below 30%. Anytime that index gets that low, the market is susceptible to a bounce to force some short covering

The Federal Reserve released a report, known as the Beige Book, and highlighted that they expect No Turnaround Soon  in the economy.  

Additionally, even though the major market averages are up 3%, why is it that the major capital providers are down significantly on the day? Look at the price changes for the following: (more…)

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