If my aim is to be totally PC about all of this, I would answer with “I don’t know” or the classic economic line of “it depends”.
What I personally think though, is that this market is clearly as oversold as it has been in ages. A full month of non-stop selling. In fact, there have only been five days this month where the market has finished higher on the day. Better said, 20 of the last 25 trading sessions have finished in the red.
That’s a rarity, in fact, it is a rarity for any market at any time.
We are severely overextended to the downside, and my favorite reading of determining market bounces is the T2108 indicator which measures the percentage of stocks trading above their 40-day moving average. Right now that reading sits in the single digits of about 8-9% but trying to bounce back into the double digits. Anytime it gets that low, the stay is brief, and the result is a massive dead cat bounce that squeezes the life out of the shorts.
So far we haven’t had that, and we had a similar reading back on October 11th. So to get two back to back readings like that without a sustained bounce is eye-opening.
Below you have my SharePlanner Reversal Indicator – it has flatlined, and that rarely happens. A bounce next week makes it possible that we see a bullish reversal in the indicator, but stay careful out there as it tries to play out.
Here’s the SPRI:
