The markets on Friday once again hit extreme oversold readings and panic gripped investors who were dumping at a ratio of nearly 5:1, based on a closing $TRIN of 4.80. Declining issues accounted for 96% of share volume on Friday.
Zweig Breadth Thrust dropped to an oversold reading of 40.59 and 4 Week New Highs/Lows dropped to 26.90.
$NYUPV hit extreme oversold at 38.43 and $NYUD:$NYUPV dropped to -29.41.
$NYSI only dropped by 34 issues on Friday when a climax signal usually means a reading of -80, +/-, so $NYSI is slightly out of sync.
$NYMO closed out the session about 26 points above the lower BB, so this, too, is slightly out of sync with some of the other gauges.
This is now the 12th time (I mis-counted last week. Last week the count was 11) that the markets have hit extreme oversold levels since the May 2nd highs. Bounces come out of these extreme oversold environments, but then the bounces are sold, and down we go again. This pattern will end one day, but I certainly have no idea when that will be.
This is the latest weekly chart of the $SPX, which I still believe is the most prudent way to play this market. Based on the weekly charts you’d either be in cash or short. That’s all there is to it.
To the imaginative eye, there is a rising trend line that could be drawn across the bottom of two of the last few candles, but I need three touch points before I feel that a trend line is legitimate, and this weekly chart fails that test. But there is always next week. Or maybe the week after that.
Chart courtesy of StockCharts.com
I continue to watch the $CRB index and the $BDI, which seem to be dancing to the beat of a different drummer. And then there’s the $SOX, which was up about 2% for the week. Watch these three next week for clues about the broader market, the broader economy, and the ever important tech sector.
When this market finally does bottom and start to rally, that rally will probably last for several months or maybe even years. That being the case, missing the bottom by a week or two is not nearly as important as surviving so that you can participate in the rally that is sure to come sooner or later.
Be careful & GL in the week ahead.