Oversold Enough To Bounce

In the medium term the market has a lot of strikes against it. Important groups like the small caps and financials have been severely underperforming. The market has been able to become deeply oversold, something that it has not done since the March lows. Despite the oversold condition and the positive seasonality the market has not been able to rally. This all points to a market that has more work to do on the downside at some point.

In the shorter run the deeply oversold condition argues for a relief rally. It is also possible that the market can work off its oversold condition by going sideways and chopping around. If it does so for the next few days the best course of action would be to just step out of the way. For now it still has a chance to rally.

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