With a few weeks left in Q3 and as we look to year end, the S&P’s are approaching the important technical level of 1121 which is the 50% retracement of the entire bear market from the Oct ’07 all time highs to the March ’09 lows. While we may continue in that direction if we can escape the Sept-Oct jinx unharmed, in the very short term and I emphasize short term, the Relative Strength Index in the S&P’s this morning rose to the highest level since Aug 7th. In the two weeks following that date, the S&P’s sold off a modest 3% to work off the overbought condition before the next move higher. This is why the indicator is just short term useful and the market doesn’t have to sell off hard to shake off being overbought.
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