Home > Short-Term Trader > Oversold Bounce Around The Bend – Breadth Registers Historical Readings

Oversold Bounce Around The Bend – Breadth Registers Historical Readings

Today's full on body slamming was done on a colossal volume ratio of -80 to 1! The lowest reading of the day registered nearly 93 to 1 during the early afternoon. There are only three other precedence going back to 2000 (all the data I could gather) where we saw such extremes in breadth. The dates are 2/27/07, 9/29/08, and 12/01/08. It's a small sample, but for what it's worth the market bounced the next day in all three instances.

Due to massive skews in breadth recently, the McClellan Oscillator was pushed today to the lowest level on record, slightly breaching the previous recorded low which took place on 10/09/08.

Today, 94% of stocks in the S&P 500 closed below their 50 day moving averages. Outside of "The Panic Of 2008" this leaves very few precedence.

50 day

The VIX closed 2.14 Std Dev above its 10 day sma. Any time it closes over 2 Std Dev above the 10 day it has proven to be a very reliable short-term buy signal. The last successful signal was on May 3rd. 

Soooooo, will we rally?  In all probability an oversold rally should commence sometime in the next few days, and maybe even starting as soon as tomorrow. I am expecting a bounce to develop somewhere between today's close of 1071 and 1040 in the S&P 500 Cash.

Recently, I had done my best to be flexible and play both sides of the tape, however going forward I will be shifting my focus more towards playing the market from the long side……BUT, I will be sure to clear the hell out of the way should things not unfold as planned. Discipline over conviction, ALWAYS!

On another note, the EURUSD trade I highlighted earlier today triggered this afternoon. The stop for this trade is set below the right shoulder around 1.2290. If the Euro follows through tomorrow and closes positive for the week then a more aggressive stance will be warranted for an intermediate-term hold. The stop on this longer term trade will be below the weekly low of 1.2143.

Categories: Short-Term Trader
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