Still Oversold

July 17, 2006 · Print This Article

After another day of lackluster trading the market remains oversold and due for a bounce. The recent sharp sell-off in all of the major indices (especially the Nasdaq 100) has brought the market to levels not seen in quite some time. Breadth (the number of declining stocks compared to the number of advancing stocks) has been absolutely horrible and all of the major indices remain in an oversold condition. These two indicators coupled with a few others that we use are screaming that a bounce is in the cards over the coming days. That being said, I still would not be surprised to see another sharp sell-off, but it is my opinion that the move lower will not be sustained. Sell-off or not, the probability of a short to intermediate-term bounce looks promising and in a traders world when the probabilities are heavily weighted towards one direction that is the best information we can ask for. Of course, nothing is certain on Wall Street, but given the recent collapse in breadth and the oversold nature of the market I think the bulls might have something to cheer about over the coming days. Have a great night and trade smart!

RSI Wilder (5) for July 17, 2006