Dangers of "deeply overbought" TAPE.....

I am watching a TAPE which has gone beyond anyone expectations, this TAPE is "deeply overbought".....

When major indices are this overbought, it is important to play extremely defensive.....

Remember "flash crash" of August 2015.....

We dropped 1000 Dow points....then Dow was way lower than now.....it went down from 18,300 in late May to 15,370 in 2nd week of August.....that is a drop of 2,930 points or drop of 16%.....

Imagine a 16% drop from current level of 22,773...that adds up to 3,643 points.....

All you have to do is pay serious attention to RSI in major indices.....they are :

SOX                70.75

Nasdaq           71.10

S&P 500        76.09

DOW             79.40

Russell 2000 80.84

I do not recall seeing these kind of RSI numbers in a very very long time.....

On the contrary side VIX @ 9.65

These are extremely volatile mix and can be very very TOPPY......

I am not suggesting sell everything, although that may not be a bad idea, IF you have serious gain....But be extremely defensive....

Pick low RSI stocks, that may shield you from a major slump.....

Take every UP day as a gift and lock any profit....

Be extremely quick in reacting to any change in market behavior.....

I think i have made my point, this thesis is not coming from my opinion, but from tracking RSI for decades.......

Good luck with your own analysis and comfort level.

BLOG does NOT give buy or sell.

Saleem

Posted in: Mixed