SCN : 1/14/2011 - How Much Gas Is Left In the Tank?

Jan 14, 2011 2:18:20 PM PST | 55 View(s) | No Comment(s) - Post a Comment Rating

Market Outlook

How much gas is left in the market's tank? 'Not much' is beginning to be a tired answer - the market's rallied another 3.4% on fumes over the last four weeks, so clearly we can't assume anything at this point.

On the other hand, the vulnerabilities that applied then apply now as well.... even more so.

Simply being overbought is one of those vulnerabilities. A 3.4% move over a timeframe of a month or so isn't anything unheard of. It's very unusual, however, when it's the latest leg of what's now become a 22% rally (since late August) with only a 4% correction (in November) breaking the hot streak up - though even that wasn't much of a break. Yes, the market can and has continued to rally into overbought conditions for quite some time. Even so, the eventually result once it does start to cave in can be pretty nasty.

Of course, in the absence of a pullback, such a discussion is merely academic.

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