Yesterday’s buying spree pushed a lot of technical indicators up to greatly overbought levels. The fear of missing out (FOMO) on a run to new highs has overcome the fear of a retest of the March lows. Investors are putting an awful lot of faith in the Fed that it can navigate these rough waters. Maybe it can. I don’t know. But, if we look back to November of 2008 – when the Fed started its first QE program – the market rallied hard for several weeks. But, then it peaked at a lower high, and eventually dropped below its November lows before bottoming in March of 2009.
The Fed has inspired one heck of a bear market bounce by stating it will do “whatever it takes.”
Even if you believe the Fed can perform miracles, you have to respect the extremely overbought conditions…chasing stocks higher into overbought conditions is rarely a good idea.
Jeff, Guest blogger
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