What Makes A Good Oversold Reading

A good oversold reading is reached when there are a string of ten trading days where most of the action is to the downside. Generally, we do not see ten straight down days. More often we see a decline, followed by a reprieve, followed by another decline. We have been following this script and are now in the reprieve stage. If we then declined through the end of the day Friday we would get a good oversold reading.

I am not predicting that we will go down through Friday. Only that if we do that it would likely be a good entry point as the market will be oversold. Tactically, I will look to trim my trading longs today in order to make room in case we do get oversold.

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