The bears have not done much with the overbought reading this week but still have another week to try and send the market lower before the overbought reading is completely worked off. Other dynamics such as seasonality and insider selling allow for further downside into the middle of the month. I believe that a move lower into the middle of the month would be a buying opportunity as many of these same factors will turn positive at the end of the month.
InsiderScore.com is reporting extreme amounts of insider selling, especially among founders who own large stakes in companies. This is likely due to capital gains tax rising next year. While this selling is likely not related to fundamentals the additional supply of stock does not help. Towards the end of the month many company insiders will be in a blackout period as we approach quarter end so the selling from insiders should lessen.
The special dividend announcements have been coming in fast and furious. Most of these special dividends are scheduled to be paid in the latter part of the month. If a portion of these dividends is reinvested it should be an incremental positive for the market.
A move lower into the middle of the month would make the market oversold, with seasonality turning positive in the latter part of the month and a slew of special dividends scheduled to arrive. The short term outlook remains iffy but it should get better once we get past mid month.