A Rest Day

Dow: +7.91…
Nasdaq: -4.54… S&P: -2.03…

The market took a needed rest today.  Biotech opened very strong, opened above some key resistance, then faded.  This happens a lot at a breakout spot. You get the breakout, then it sells off. Both IBB and XBI recovered off their lows though, so some dip buyers stepped up.  Some individual biotech names sold off 2 or 3% though.

Many are asking me if the market is overbought.  The answer is yes and no, depending on what you look at.

The McClellan Oscillator, one of my favorite overbought/oversold indicators is not overbought by any stretch, however, when you look at relative strength and  stochastic readings on the SPX and Dow 30 it is very very high. Readings are in the high 90’s. That’s high, almost obnoxiously so.

This doesn’t mean the market needs to drop 5-10%.  We had similar readings about a month or so ago if you remember, and we went on to make new highs.

The market can work off overbought conditions over time not price, meaning some sideways action (not necessarily down action), can work those overbought conditions off.  That’s not to say the market won’t pull back, it probably should, to be honest.

We didn’t see any significant action on the P&L today although TMKN reported nice earnings after the market closed and its trading up around 19.25.  We’re long at 16.86, so if bids hold we could have nice open in the morning.

I also sold another 1/4 LABU today (+37.1%). We now have a half position remaining.

See you in the morning.

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