With the T2108 at 79% (79% of NYSE stocks closed above their average price over the past 40 days) the market is near extreme overbought territory. T2108 can get as high as 85-90%, but when it does the market rally is about over. So I am proceeding slowly. Thursday was the second day of the new QQQ short term up-trend and the GMI flashed a Buy signal at Tuesday’s close. LAD, which I wrote about yesterday, moved to another new high. Other stocks at green line all-time highs are: ABG, CP, V, LMCA, TRMB, EQIX and RAX. All of these were in one of my IBD 50 or other IBD cited watch-lists. They might be worth researching.
When the T2108 reaches 85-90%, does that always mean a correction, or can the market just churn sideways while the average price catches up?
The T2108 can stay around 80 for weeks. On the other hand, when T2108 reaches single digits,it snaps back more quickly.
I enjoyed watching your recent video. In reference to stocks at an all-time high, how do you reconcile buying when the stochastic is at 50 or below? I’m guessing that stocks at all-time highs will not have a stochastic below 50. Do you wait until falls to below 50 before buying?
Great question. There are several set-ups I consider. One is to ignore the stochastic and to buy the break-out to a new high with a stop loss put somewhere under the break-out. The other is to keep a list of possible stocks for purchase and to wait for an oversold stochastic (<20 or 25) followed by a rebound above the 30 day average. I then place the stop below the 30 day average or the low of the day it broke above it.