The market is terrible, isn’t it? I will call this market “Serena Williams Market”. Even if you’re not a tennis fan, you definitely know who Serena is.
Think of her amazing career as a bull market: all she did was win. Then she spent a year or two reaching the finals of several Grand Slam tournaments, but never won those. Think of it as the coronation period (lower new highs).
Her career was already in decline – the equivalent of a bear market – when she announced in August that she was retiring. I played a few tournaments and barely made it past the first round (think of the market that keeps faltering and dropping).
After that, she entered the US Open with such low expectations from everyone. But she won. And in the first week, she continued to win until the third round. That was enough to get people excited, but… in the end… it was just a market spike.
(I talked about ‘Serena Market’ and other topics like this line on the S&P 500 chart with TD Ameritrade on Thursday, click on the lint to see it youtube.com/watch?v=91MiHzWDIjQ)
Now, let’s talk about pointers.
My oscillator is oversold. It was hooked up in the middle of next week. But since one week out of today is the end of the quarter, I wouldn’t be surprised if we had gathered earlier or later. Let’s just note that we are in the time frame. You can see how much the oscillator has fallen this week.
We have already discussed the 30 day moving average of the advance/decline line. This, too, is set to be oversold in the middle of next week so it could dip below but look where it is now. Remember a week ago it was at the zero line, so it’s finally heading into oversold territory.
The volume index is 44%. I think that no matter what the market does in the next few days, it will probably go down to at least 42%. This too is oversold. Even in bear markets, the worst drop ever is 38%-39%.
McClellan Summation is still trending lower (bearish), but it will now require a net difference of 5,100 present applicants minus the losing stocks on the NYSE to halt the decline. A few weeks ago right after Labor Day, before that 5% rally, that was at 5300. Sure, it could go higher, but the point is, it’s getting there now as well.
The Nasdaq’s Momentum indicator, which is based on price and not supply, is also oversold. Here I am walking the Nasdaq about 800 points in the next week or so to see when the indicator stops falling and goes higher. That day is Monday. This is the definition of oversold.
Feelings, as we know, are bearish. The American Bears Association of Individual Investors has now crossed 60%, which is everyone’s concern.
The Daily Sentiment Index (DSI) is at 8 for the S&P and 10 for the Nasdaq, which is unchanged from the day before. The real move came from bonds as the daily sentiment index finally fell to single digits. It’s now seventh, the same reading we saw in mid-June.
Plus, all currencies are single digits and the dollar index is at 93. This tells me we’ve gone to the extreme. That’s why I think we should gather in early October.
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