Excessive Short-Term Exuberance Removed
In spite of the two-day pullback, the overall market is not extremely oversold. Remember, this pullback is occurring after over 20% of the stocks in the S&P 500 had 2-period RS reading above 99. And QQQ had an RSI reading above 99. All the past two days has done is remove that excessive short-term exuberance. The good news is that they’ve done a good job of taking out the big cap high flyers (FSLR, CRM, etc.) and as I mentioned yesterday, the more days they do this, the better it will be longer term.
As I’m writing this (Tuesday evening) Alcoa has already reported and they surprised to the upside. The stock and the futures are reflecting this news. If the good news continues (meaning the larger companies beat the numbers) and the market doesn’t respond, then we could see a regime shift. Until proven otherwise though, the longer-term trend remains higher.
Today’s Potential Opportunities on Further Pullbacks:
ETFs: QQQ