MARKETS OVERBOUGHT?

January 21, 2018

 

Many articles and financial news stations are stating that the markets are overbought. This would imply at least a slowdown in the run up we’ve witnesses since November of 2016 if not a correction. Many people are talking about being way overdue for a 5% correction.  What would a 5% correction do to the markets and the psychological reaction of investors?  We ask this because at today’s DOW value of 26,071, a 5% correction would take out about 1,300 points.  We think that could spur a further drop because a) there’s not been a drop of 5% in a long time and b) 1,300 could create some level of panic.  If this were to happen then a buying opportunity could exist - possibly a very good buying opportunity. 

 

As we have all heard and seen in action when most are selling the people that make the largest gains are the buyers.  The VIX is at historic lows. We did see it move up some on concerns of the U.S. Government shutdown.  It has in fact shutdown and if it remains closed I guess we will see Monday at 9:30 how much concern the markets have.  With this in mind, it seems clear that what we are dealing with is a concern, and a valid concern, that the markets are overbought and need a pullback versus we are just going to keep moving up and therefore we have to closely watch for dips and buying opportunities.  We have had two alerts this year the first for Visa (V) that provided a 20% return and then kept moving higher.  The second alert for JD is still open and we are looking for a positive outcome. 

 

Thanks for reading and subscribing.  As you are aware 2016 produced alerts with gains of over 280% and for 2017 the alerts provided for over 700%. We are working hard each day to identify opportunities, reduce risk and hopefully break 1,000% in 2018. 

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