Things appear to be oversold this morning in the major equity markets. Momentum indicators have fallen to historically low levels and various “risk on/off” metrics are overextended in one direction. A bounce is likely due but that doesn’t mean we load up on leveraged ETFs and short the VIX like it’s going out of style. This is no time to be reckless and trigger happy.
The trend has changed in the equity market, while we make lower lows and lower highs, buyers have been having a tough time catching the falling knifes. As the famous saying goes, things can always become more oversold. The McClellan Oscillator is depressed, I agree. But it can always go lower.
There has been much technical damage created and a single day is unlikely to be enough to repair that (that’s to say we do get a pop today). I still view things from a bearish lens at this point but any type of consolidation would be welcomed. We’ll see what happens.
Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.
