Is the Market “Overbought”?

Looky here, people. By numerous forms of reckoning, this market is the most overbought in two years—by normal measures.

But just in case you’ve been living out of a yakskin yurt in Siberia the past 12 months, know this: we have not been in a “normal” market environment.

You don’t have to pull out your volumes of charts and technical data. Just use your common sense. Considering the extremely oversold levels the market is coming off of from Oct//Nov, we are not “extremely overbought” right now, by any means. Sorry, bearshitting short-selling hopefuls. Your motives and agenda are clear when you keep saying stuff like “Market going down. New lows this (month)” (ad nauseum).

Don’t you think that the stupid and embarrassed fund managers realize this? They are looking at no bonuses for 2008. You think this is all very funny? They must keep buying now, or risk going into personal bankruptcy and foreclosure. They’re even cutting back on their visit to Starbucks, choosing to drink Dunkin’ Donuts coffee instead, from a pink Fly-autographed cup. It’s a conspiracy. If it all works out, they will be able to stay in their homes and say they called “The Bottom”. All will be forgotten and forgiven (in 20 years).

In the meantime, money flows have been coming back. Don’t be surprised to see net inflows to mutual funds in January, due to the Obama-rama celebration.

See, you must take things in context, else you will embarrassingly debank yourself while giggling like a clown. That would be sad, my friend—but still rather clownish.

As I said before, we will know this week if this market rally has legs. However, I’m beginning to believe that the stumps are sprouting some feet.

That is all.

Carry on and be well, as best you know how.

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As of 1:00 ET, there were 140 new PnF chart pattern breakouts (double top, triple top, bullish triangle, etc), and only 10 stocks showing new chart pattern breakdowns.

Here’s an example of a breakout in a healthcare name:

…and one example of a breakdown in a healthcare name:

Disclosure: I bought shares of ELN @ $7.67.

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Breakout:

ELN:

Breakdown:

LH:

NOTE:

As of 1:00 pm ET, out of a total of over 7,000 stocks and ETFs I track, there were 140 new pattern breakouts (double top, triple top, bullish triangle, etc.)  and only 10 stocks showing new breakdown patterns.

Still bullish.

Disclosure: I bought shares of ELN @ $7.67.  

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I know it’s still frackin’ football season, but baseball been berry berry good to me. It happens to be my favorite sport. So, I’ll use my poetic license and hit you with a baseball metaphor.

This morning I took a swing at 10 low priced small cap names, mainly because I need something to do, and I’m getting antsy. I enjoy “jumping the gun”, then banking large rolls of coin and bragging about the wins, humbly mind you.

If I’m wrong, you won’t hear a peep from me, of course. SOP. But, I’m placing a bet (albeit small) on a continuing rally.

That said, I bought:

BLC @ $1.93

LSE @ $2.34

CPF @ $8.74

FOE @ $7.53

FBN @ $2.75

GKK @ $1.24

LZB @ $2.65

MNI @ $1.77

SYNA @ $17.71

VRS @ $1.34

Yeah these are sucky, but sometimes you just gotta step outside the coveted bunker with 3 ft thick walls, and expose yourself to hostile fire—for s&g’s.

Carry on….

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In a continuing development, there are now over 5 1/2 times more bullish breakout patterns than bearish breakdown patterns on my PnF database of over 3,200 stocks. Pay scant attention to the Dow. It will distract you from what appears to be happening—-a broad-based rally in stocks, especially small and mid caps. Are we in overbought territory? You betcha. Can the market still go higher? Affirmative.

In last night’s comments, I indicated that, “of the stocks traded on the NYSE, almost 72% of them are now trading above their 50 DMA. In addition, 64% of the stocks in the S&P 500 are on PnF buy signals. That number is 76% for the Nasdaq 100″. After today’s down action in the Dow, those numbers are 75%, 67% and 78%, respectively. It’s gotten even more bullish. See what I mean?

The market has more strength going for it than I expected. How odd, yet profitably pleasing, in a most anticipatory kind of way.

I am bordering mild elation and ideas are bountiful. Let me throw out a diversified list of what are on my screens: CMN, CUB, CVTX, EGO, ESI, FAF, FSP, KGC, MCD, NNI, PCG, RATE, RMBS, STSI, and TOL. Not what I’d expected. All of these have favorable reward to risk ratios of over 3 to 1, and are exhibiting above average potential.

Sorry, I’m not in the mood to give you all the colorful charts like my other compadres might be inclined to do. Use your imagination. I’m sleepy tired (*yawn*).

Groovy…;

[youtube:http://www.youtube.com/watch?v=ar-Z_l907DY 450 300]

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