xjo weekend zoomba lounge, page-57

Hi Redbacka, as always thanks for your regular market summaries, I always read them.

This one prompted me to reply - in relation to your comments about the overbought condition of the market and "overbought" being a meaningless term. I'm guessing you didn't mean that literally, nevertheless your comment suggests that it has remained overbought too long and therefore must pull back. I agree it will pull back from overbought eventually, but imo it can go on for quite a while longer in this condition - i.e. in relation to "overbought" status as signalled by various indicators.

There is plenty of evidence to indicate that overbought conditions can persist for lengthy periods which are much longer than the current one (my comments apply to oversold signals as well).

Just looking at the DJIA daily chart, I picked out a 3 year period and looked at how often the slow stochastic (just as an example, but it could be RSI or some other indicator) remains overbought for lengthy periods.

Currently the slow stochastic has been overbought for 32 calendar days, since Jan 7th. Looking at the 3 year chart for the DJIA, there are 6 overbought periods of 3-4 weeks duration, but more importantly 4 periods which are almost 10 weeks (70 calendar days) in duration.

As you say, the trend remains intact. So for me the overbought condition isn't a meaningless term, it remains a supporting signal of your main premise, which is that the trend remains intact.

Cheers, Sharks.