Market is short term overbought but Advance/Decline line still shows Bull Market

Market is short term overbought but Advance/Decline line still shows Bull Market

Posted on July 11, 2011

Stocks typically fall faster than they rise. That was not the case in the second quarter. Stocks declined nearly every week from May until late June. Then during the last week of June and first week of July we experienced a sudden reverse erasing most of the eight weeks of losses.

After Friday’s dismal employment numbers were released, we learned two things: economists are not very good at making predictions (especially about the future) and the market didn’t want to go down. There was every reason for the market to fall hard on Friday, yet the Dow only closed down 62 points.

According to our indicators, the market has become extremely overbought (gone up too far, too fast). Currently, our proprietary volatility indicators are still Bullish. The Advance Decline Line, calculated on the S&P 1500 stocks, reached a new 2011 high on Thursday, meaning that the breadth of the market continues to be very strong.

The market is due for a short term pullback. That said, we continue to be Bullish and will likely buy on dips and maintain a higher than average percentage in stock.

Every effort was used to provide accurate data and mathematical calculations to provide, what we believe to be, accurate results. Canterbury Investment Management, LLC, and its principal owners, make no guarantee of completeness or accuracy of data or calculations as well as conclusions of any statistical data or information contained in the simulation illustrated on this page. Past results or performance is in no way a guarantee of future results.

Canterbury Investment Management: Tom Hardin

More About Tom Hardin

As Chief Investment Officer, Tom Hardin makes all the final decisions on all investment and portfolio management decisions for Canterbury Investment Management. Tom has more than 30 years experience in the investment management industry and has broad breadth of knowledge. He is known for as an innovator, educator and been revolutionary in the advancements in portfolio and risk management.