Posted on 05/23/2010 10:33:47 AM PDT by blam
The Market Is Massively Oversold Based On This Indicator
Vincent Fernando, CFA
May 23, 2010, 10:47 AM
Here's one reason to believe that bearishness is getting long in the tooth. Less than 2% of S&P 500 stocks are above their 52-week moving average.
Basically the entire market has been creamed and historically this has been a decent trading opportunity.
Traders' Narrative:
"...a number of significant buying opportunities have been identified in the past after periods of market weakness have caused the percentage of stocks above their 10-day moving averages to drop below 10%.”
...
I mentioned the financial and energy sector in passing yesterday as being extremely oversold with just 1% (or less) of stocks closing above their 50 day moving average. Today the banks got a major boost, rising much more than the general market proxies. Most are attributing this to the passing of the Wall Street regulation bill in the Senate on Thursday night. As a technically oriented trader I prefer to think of it as an expected reaction to the extremely oversold condition in that sector.
Even if you believe we're heading lower in the long-term, perhaps we're in for a near-term bounce.
[snip]
(Excerpt) Read more at businessinsider.com ...
Hmmm, I’m not sure that the market has NOT been oversold for several months! I would not put my money into the market.
There's just one variable missing from these two equations...now what could that be...
and one indicator doesn't convert a bear into a bull.
spokeshave.
That oscillator varies too much to be useful. In March of 2009 it correctly stated the market was oversold, but in April —just a few weeks later—it said the market was dramatically overbought.
If historical price vs current price were the only factor, that would be true. But it isn’t.
I analyze stocks based on the health of the company, most expanded based on credit during the boom years, now that’s coming back to haunt them.
Walgreens is still pretty strong, though. They expanded on cash, not on debt, and they’ve positioned themselves to take advantage of both the recession and the Obamacare bill, but in such a way that they are not dependent on the Obamacare bill. It’s fascinating to watch.
If this recession had waited another 2 years, I’d be getting paid to give advice like that :p
Sorry...maybe we can rustle up a double-dip, would that help?
based on the fact that a socialist is now running things, I contend that we are still in a bubble about to burst.
Thanks for the ping. While I believe we are in a heap of trouble, and that history rhymes even if it does not repeat, I wouldn’t expect the timing match between two different market sequences to be that exact. It could happen, but I doubt the predictive value. I’ve seen too many charts of 1929 lined up against, say 2001, which looked pretty close for a while and then diverged to be more certain than cautious.
That said, I agree we are in for “interesting times.”
This stench of this economy is overwhelming. It's not going to "burst", it's going to go nuclear. Batten down the hatches.
The greatest crashes in history have happened when the market was massively oversold. That's one of the warning signs to look for.
I’d like to know what people are investing in over the last year and a half? It seems they are counting govt. money to keep stocks up forever.
And surely in the past we have been staring at a mountain of debt such as we have now...right?
And you can always judge future results by looking at past performances....right?
I wouldn’t go into the equities market today with YOUR money, much less mine.
Yes, I think that's likely, and personally I am trading accordingly.
But that's a trade. Longer-term, the 50-day Moving Average is rolling over and starting to point downwards.... the Bull Market in stocks is by no means dead at this point, but he is stumbling. I'm hoping to catch a few percent on the upside as the market rebounds off its 200-DMA and bounces higher for a week or two (maybe); but after that I'd be looking for Short opportunities moreso than Long....
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.