Pretty wild day on Wall Street today! One of those days, when being in cash from days prior is probably best. Stocks are currently very oversold on multiple short-term indicators. However, I believe that the balance of evidence now favors the bears. Many long-term market breadth indicators that I watch have turned decidedly bearish, calling into question the uptrend in stocks.
Take a look at the chart of NY Stock composite index with various market breadth indicator on it. Notice that every one of them is now marked with a red circle. This indicates that both the intermediate and the long-term breadth indicators have turned bearish. This changes my bias from bullish to bearish and implies that I would be now looking for overbought conditions to enter on the short side.
Take a look at the chart of NY Stock composite index with various market breadth indicator on it. Notice that every one of them is now marked with a red circle. This indicates that both the intermediate and the long-term breadth indicators have turned bearish. This changes my bias from bullish to bearish and implies that I would be now looking for overbought conditions to enter on the short side.
Having said this - a short-term rebound is highly likely. Take a look at this chart of QQQ. Notice that the percentage of stocks above the 20-day EMA and the 50-day EMA are now at zero! This is as oversold as it could possibly get.
Also take a look at the image below for the current market recap.
Charts mentioned can be found here
Charts mentioned can be found here
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