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Thursday, November 13, 2008

11/12/2008 Market Recap: Market Oversold

The market is oversold, and may bounce back in the short term.  As mentioned about 2.4.2 NYSE - Issues Advancing, it is oversold, and the worst scenario is rebound after three days, then the potential rebound will be as late as Friday.  However you should take notice that oversold doesn't mean it is okay to bottom fish.  Recently the market is at extreme condition and bottom-fishing based on oversold signals which are proven to be effective in the past is highly risky.

0.0.2 SPY Short-term Trading Signals, all major signals are on this chart.  Note the green dashed line, the tick of today's close is extremely negative.  You may check out what the market did in the past after the similar extremely negative tick.


0.0.0 Signal Watch and Daily Highlights.  Take a look at the overview of all signals.  Many of them are green and look promising. However the mid-term buy signal may not hold should the market sell off further tomorrow.


1.0.3 S&P 500 SPDRs (SPY 60 min).  RSI is oversold, and this signal on 60-min chart is quite accurate as you can see what happens at the locations marked by green dashed line.  In addition, the pattern on the chart looks like a standard Measured Move, and today's low has roughly reached the downside target, which means we have a hope.


1.0.4 S&P 500 SPDRs (SPY 15 min), 1.1.6 PowerShares QQQ Trust (QQQQ 15 min), the positive divergence of MACD and RSI looks quite impressive, which could cause a rebound.


1.0.5 Major Accumulation/Distribution Days.  Today is the third Major Distribution Day.  According to the statistics, a big rebound is coming soon.


1.3.7 Russell 3000 Dominant Price-Volume Relationships, 1665 stocks price down volume up, the market is oversold.


1.4.2 S&P/TSX Composite Index (60 min), Canadian market looks oversold on the 60-min chart.  1.4.3 S&P/TSX Composite Index (15 min), Bullish Falling Wedge on the 15-min chart, and MACD and RSI show positive divergence.

3.1.0 US Dollar Index (Daily), US dollar is overbought.

3.2.0 CurrencyShares Japanese Yen Trust (FXY Daily), Yen is overbought too.


  1. When i'm bearish, i LOVE oversold mkts. When i'm bullish, i LOVE overbought mkts.

    One of the most important concepts and least understood is the difference between a mkt or stk that IS oversold or overbought and THE ABILITY TO GET (& stay. That's a definition of momentum.) oversold or overbought. The mkt or a stk can stay oversold or overbought for a long time.

    Merely being oversold or overbought is relatively unimportant.

    In other words, when they were going up, would you have rather been long POT or MO ? When they were going down, would you have rather been short POT or MO ?


  2. Dave,
    It is irrelevant whether you are in Pot or Mo when market are OS or OB. It is more important to be able to decifer how long it will stay OS or OB. You are a winner if you have that capability.


  3. 2cents,

    You missed the point. I was stating that i'd rather be in a sector that was capable of getting overbought because it then had momentum.

    If you think that MO had the momentum that the ag sector had, then YOU are irrelevant.

  4. Dave,

    I would not be so sure about that sector any more. After all we are in a recession.



  5. 2cents,

    You must be NOT able to read. There was nothing in either of my posts that said that i was bullish on the ag sector.

    In my first post, i stated "In other words, when they were going up, would you have rather been long POT or MO ? When they were going down, would you have rather been short POT or MO ?"

    Again, you missed the point.

    Before you comment on other people's post perhaps it would be helpful if you learned how to read.

    Try this for a start

    Oh, yeah, don't move your lips.



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