I would like to think that my last post, The road to a 2016 market top, panicked the market into a vicious sell-off on the first trading day of the year, but I can't think of many people with have the hubris to make that kind of suggestion. As the market closed, the SPX was down 1.5% and it was off over 2% at the worse point of the day. What`s next?
At the close, the SPX managed to stay at a key support zone, with RSI 5 at an oversold reading on roughly average trading volume. These readings appear to be constructive and suggest that downside is limited from these levels.
Other key metrics are also flashing oversold readings, but I would warn that oversold markets can get more oversold and my initial take is that there may be some further minor downside risk from these levels.
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