After four consecutive down days, it's time to turn to our trusty old McClellan Oscillator to find out if the markets are oversold yet. Getting right to it, here are the two year charts for NYSE and NASDAQ McClellan Oscillators to begin with.
As we can see, both the oscillators still haven't quite reached the oversold levels but the NASDAQ is pretty much there. Another down day and it would be well into oversold territory. Another thing to consider here would be how rapid this fall has been.
Now let's move on to the Advance-Decline volume charts for NYSE and NASDAQ respectively.
Aha! What do we have here here? The advance-decline volume is showing positive divergence with the advance volume being greater than the decline volume while the market went down. A sign of things to come?
Let's move on to the Advance-Decline issue charts now.
Interesting indeed! Both these charts are also exhibiting positive divergences with respect to the overall markets.
So, what are all these charts telling us? The markets are approaching oversold territory and while oversold can very easily become "more oversold", the odds of a short term bounce are favorable here. It would not be a smart move to initiate new short positions here and taking some profits off the table if you were short this entire time might not be a bad idea.
I will be back with a watchlist of both long and short picks sometime during the weekend. Make it a great weekend!