Stock prices fell sharply on Thursday with SPDR S&P 500 ETF (NYSE: SPY) down 1.6% and other major market averages down a similar amount. The tech-heavy NASDAQ 100 index, the index tracked by PowerShares QQQ (NASDAQ: QQQ), was down a little more than 2%. At the end of the day, just 11% of the volume on the NASDAQ was to the upside. More than 80% of the stocks listed on the New York Stock Exchange closed down.
Despite the broad selloff, the major market indexes are not yet oversold. ETFs tracking the indexes all closed with ConnorsRSI readings above 20. Traders looking for new buys should consider sector and international ETFs for oversold opportunities. Eight ETFs are deeply oversold with ConnorsRSI readings below 5.
Testing shows we should expect a stock to have a ConnorsRSI reading below 5 on just 0.63% of all trading days. This test was completed on approximately 6,000 highly liquid stocks from January 2, 2001 through February 28, 2014 and the results are presented in An Introduction to ConnorsRSI, 2nd Edition, which can be downloaded for free here.
On average, after the ConnorsRSI reading on a stock falls below 5 we have seen a gain of 2.15% over the next five days. The ETFs on listed above should be considered potential buys.
Now let’s look at the most overbought and oversold stocks (according to ConnorsRSI) heading into trading for September 26, 2014. ConnorsRSI is a proprietary and quantified momentum oscillator developed by Connors Research that indicates the level to which a security is overbought (high values) or oversold (low values).
CNL (Cleco Power Llc) is the most oversold stock with a ConnorsRSI reading of 0.71.
GXG (G-X FTSE Colombia 20 ETF) is the most oversold non-leveraged ETF with a ConnorsRSI reading of 2.20.
AGQ (Proshares Ultra Silver) is the most oversold leveraged ETF with a ConnorsRSI reading of 6.72. This is the second consecutive day AGQ has been the most oversold leveraged ETF.
RENT (Rentrak Corp) is the most overbought stock with a ConnorsRSI reading of 93.39.
SHV (iShares Short-Treasury Bond) is the most overbought ETF with a ConnorsRSI reading of 88.24.
TradingMarkets Lists provide users pre-populated lists of stocks and ETFs identifying symbols with overbought and oversold ConnorsRSI and Bollinger Bands® readings. The Screener Lists are powered by The TradingMarkets Screener.
All data is as of the end of day on 9/25/2014.