Thursday, January 7, 2016

A tradeable bottom?

After the market closed yesterday (Wednesday), I tweeted a series of charts indicating that the market appeared to be oversold, but fear levels weren't extreme yet:
  1. The market was oversold on % of stocks over the 10 day moving average based on the breadth charts from IndexIndicators;
  2. The market was oversold on net 20 day highs - lows;
  3. The market was showing a positive RSI divergence on the hourly SPX chart; but...
  4. The CBOE equity only put/call ratio was only at average levels, which indicated no signs of fear from the option market; and
  5. My Trifecta Bottom Model was nowhere close to a buy signal (described here), which was another sign of complacency.
I had concluded that a bottom was near, but we may need a further wash-out before a tradeable bottom could be seen. The stock market weakened further on Thursday and a number of fear metrics spiked.

Is the market near a durable bottom?

The full post is at our new site here.

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