Stocks breathtakingly overbought, but…

Our favorite cycles expert, Peter Eliades, is getting the second-highest overbought readings in 40 years from his New 10 TRIN indicator. However, the conclusion to be drawn from this is not so obvious as you might expect. Here’s Peter:   ”It would seem simple to say that such a reading must be marking a market top if it is the second most overbought reading of the past 40 years.  But as we have pointed out so often, extreme overbought readings on virtually any momentum-type indicator can turn out to be bullish rather than bearish.  In fact, if we trace back all the readings on the S&P 500 New 10 TRIN lower than .40 over the past 37 years, almost all of them occurred soon after important bottoms were formed and almost all of them marked low risk territory for the market.  They occurred in October 1982, January 1987, January 1988, May 1990 (this was one of the few readings that was registered near a market top), October 2003, November 2004, and the current readings in July 2009.”