Yesterday saw an “outside” price bar on the cash S&P500 index and prices are now at their lowest levels since July of 2006. The steep downtrend with severely oversold conditions continues and the ADX line (shown in the last posting) has risen further above both Directional Index (DI) lines. The RSI is now at its lowest level on the daily chart since July of 2002.
Of course, what is oversold can always become more oversold. That truism has me unwilling to touch this market right now. Before my work can become positive on the S&P’s I must see a bounce (to relieve the oversold condition) and then another oversold (less than 32) reading.
Looking at my database (from 1983) the RSI has been as low as it is now just eleven times, and only did three of those instances occur at “the” bottom: the 1987 crash, 1994 and 1996. Significantly, none of those three cases saw the market reach an extremely oversold condition (RSI less than 32 for six or more days) as it has now. Conclusion: This is not "the" bottom.
Here are the support levels to watch today:
1234-38
1220-25
1200-05
1187-93
Of course, what is oversold can always become more oversold. That truism has me unwilling to touch this market right now. Before my work can become positive on the S&P’s I must see a bounce (to relieve the oversold condition) and then another oversold (less than 32) reading.
Looking at my database (from 1983) the RSI has been as low as it is now just eleven times, and only did three of those instances occur at “the” bottom: the 1987 crash, 1994 and 1996. Significantly, none of those three cases saw the market reach an extremely oversold condition (RSI less than 32 for six or more days) as it has now. Conclusion: This is not "the" bottom.
Here are the support levels to watch today:
1234-38
1220-25
1200-05
1187-93
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