The market finally rallied yesterday proving the axiom that a broken clock is still right twice a day. In the current market I don't rule out anything but the majority of the evidence supports a continued rally:

  • The market is oversold and will remain that way for a while. It will not be overbought until after options expiration.

  • The put/call ratios will be maximum oversold at the end of the day today. The reason they are only becoming oversold today is that for the first few days of the decline investors were still buying calls.

  • Rydex traders are now positioned negatively and they actually increased their bearish bets yesterday.

  • A sharp reversal from such a high level in the VIX tends to lead to further upside.

  • The AAII, NAIIM and DSI surveys all show extreme bearishness. It is disconcerting that the Investors Intelligence survey is still showing excess bullishness. However, it seems to be an outlier as it is the only sentiment indicator doing so.

  • The vicious cycle of selling begetting selling seems to have been broken, although there is still the  danger of margin calls for the next couple of days.

1 comment:

Encouraging Signs said...

[...] of the positives I discussed earlier in the week are still in place. The market remains oversold and  the put/call ratio is deeply oversold. Many [...]