Deeply oversold bounce ?

On Friday market staged a deeply oversold bounce.Since May / June this was the-worst slump market has seen from series of all time highs to well below 200 DMA slump.

Reasons are many but one reason may be troubling this TAPE more than others. 

Before we analyze all the reasons, we must look @ current RSI :

Russell 2000      17.98

S&P 500            29.52

SOX                   30.27

Nasdaq              32.44

DOW                 34.31

Please keep in mind that the above RSI numbers are after Friday's close, they were much lower @ Thursday's low & close.

Russell or RUT is lagging badly, before we use to look @ RUT as a leading indicator, IF that theory still holds, then we are looking @ more bad news in TAPE.

DOW has and remained a touch stronger than any other index, before it was the strongest now barely above Nasdaq in performance.

SO...what is keeping this market in negative slant, reasons are too many, Trade dispute with China could be number 1 in terms of Sales and Profit scenario of many companies as Chinese economy is slowing down, this will impact markets worldwide.

Despite China trade tiff, Indices held up well and kept making new all time highs.....

IF China US trade issue was not enough, we are dealing with a Fed who is all set to combat rising inflation in economy and wages with higher interest rates, not a very desirable picture for investors.

It has been said and repeated often by pundits " do NOT fight the fed "

SO.....higher interest rate trend is the current culprit of market violating all the technical levels.

SO... we went tumbling down not only 50 DMA but 200 DMA also in all indices & more.....

Technical breakdown cannot be taken lightly, it IS a clear message that something is not going well for markets and TAPE.

SO all we have a a deeply oversold bounce....nothing more.....

NOW every day we have to pay attention to US statistics about higher growth and higher inflation and market may react quickly on the downside anticipating Fed tightening......

Also we have to pay attention to what kind of "oversold bounce we are getting, ....last Friday was NOT very convincing, internals were negative in key areas and positive was very weak.

Only way we can deal with this kind of uncertain TAPE is have reduced exposure and pay attention to quality of stocks in your portfolio.

When we have " technical breakdown " like this, it takes a while to repair technical damage.

Good luck with your own understanding of this TAPE and your comfort level.

BLOG does NOT give buy or sell.

Saleem

Posted in: Mixed