Overbought

During the last 8 trading days the market has ripped up 14% from its lows in October as bears jumped over each other to cover there shorts. During this move upwards there have been many calls saying the market was overbought. Most of the calls have been wrong because most calls are based on price movement and not "volume" of the market. 

The Piker Indicator finally hit overbought on Friday, flashing a very overbought signal of 83 typically overbought is 67 or higher. This high number represents that the volume and market has been skewed towards the buy side meaning there are to many buyers and not enough sellers but it also indicates that market internals are also heavily skewed to one side as well. The only way to make them move back to the middle is for a consoldation or a move lower.   Of course there is still a chance of SPY moving higher, in fact it will not be surprising at all that SPY moves 1% higher to its 200 ema and test this obvious resistance level before the market heads over.

  This high number has occurred only a few other times this below is a chart highlighting these occurrences. As you can see the market has dipped over each of these times. 

The tired and true indicators were to anxious to jump into the overbought condition.  The old Stochastic has been showing signs of overbought for the last 4 days, catching shorts in a 4% move upwards after showing overbought. 

The market has changed since these indicators were developed now everyone uses them the Piker Indicator is a new indicator that is centered around market volume and market internals rather then price movement which allows it to better reflect to overbought or oversold conditions.