Thursday, August 15, 2013

Short term oversold but ......

A 200 odd point down day! How very inconsiderate of the markets.....tut tut. But seriously, an impressive show of strength by the bears, who started the day on top and pressed home the advantage all day. With two consecutive three digit decline, including a 200 point down day, its time to turn to our trusty ol' McClellan Oscillator to see if the markets have reached oversold levels.

Here are the weekly McClellan oscillator charts for Nasdaq and NYSE respectively.

As the astute observers amongst you must have certainly observed, the markets have reached oversold levels. What does that tell you? Well, sadly, the markets work in terms of probabilities, and not certainties. What it does tell you is that the odds favor a bounce here. Oversold can very well become oversold, but then the odds would just favor the bulls even more. Add to that the fact that S&P is right at MA(50), which has been an area of support before.

Then why the "but" in the post title. The last couple of days have done considerable damage to the charts and the bulls will have to do some considerable work to cross some important levels, if they are to take control once again. But more on that over the weekend.

Here are two stocks that I like going ahead.

Take care and good luck!

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