I did not think that the market would get maximum oversold because of the end of the month markups, but it looks like we are heading there. The market will be maximum oversold at the end of the day on Monday. Once the market is maximum oversold it becomes increasingly difficult for the market to make progress on the downside. The market should see support through the latter part of the week and a down day on Monday should lead to a decent short term long side opportunity. This is corroborated by the large jump in the VIX.
In the medium term the oversold reading is a market negative. The above chart shows that the market is the most oversold it has been since the March low. This means the market has gained downside momentum and that any short term rally is likely to ultimately fail. Any low made this week is likely to be retested in the weeks ahead.