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Can We Move Higher While Overbought?

|Includes: BIDU, GOOG, IOC, National Oilwell Varco, Inc. (NOV), SOHU
Breakout or Fantasy?

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# September 21, 2010
# 08:56 | Bagger Vance NOV ($43.07) Sold to Close NOV 101610 40 C Oct 40 calls, at $3.45 +71%
# 06:52 | Bagger Vance IOC ($66.30) Sold to Close IOC 101610 65 C Oct 65 calls, at $4.55 +47%
# 06:51 | Bagger Vance SOHU ($56.30) Sold to Close SOHU 101610 50 C Oct 50 calls, at $6.00 +74%
# 06:50 | Bagger Vance BIDU ($90.66) Sold to Close BIDU 101610 85 C Oct 85 calls, at $7.30 +92%
# September 17, 2010
# 10:14 | Bagger Vance GOOG ($485.00) Sold to Close GOOG SEPT 480 C Sep 480 calls, at $5.00 +67%

The Fed came and went Tuesday and once again tried to prove itself to the markets and the world that they mean business.  If it's printing more money to float in the system then so be it.  The fear of the Fed missing the boat is disappearing like sand through your open fingers.  As we approach a seasonally strong period we must be mindful of the overbought condition this market finds itself in, and while that is no reason to sell there are many others out there.  Gold bolted out after the decision today and is knocking on the door of 1300 an ounce.  Silver is also shining as well.  While breadth was weak it's hard not to expect that after such a strong Monday.  Sectors look rather good here and perhaps will be even better after a modest pullback.  With the wind at their backs the bulls have everything set up nicely for a move to the April highs and perhaps further.  Interest rates are still very low as bonds were very strong today (curiously). 

I still suspect there could be a strong pullback.  The VIX is flashing red here as it rose sharply and cannot seem to get below 21.  Put/call ratios are more stable of an indicator now, but bullish sentiment is still around.  Strikingly, the 'wall of worry' is still high, yet Monday's action can be considered nothing less than giddy.  In the meantime, I'll just go with what got me there; the indicators, watching and listening to what the market is saying...and just go with it.

Hit em' straight!

Bagger



Disclosure: no positions