The last time the market has had a 2-day cumulative ConnorsRSI reading (the past two days added together) of under 30 was on June 24 and the Fed proceeded to step in and launch a 5 week upward move. Whether this occurs again remains to be seen but no matter how one measure this, the market is oversold.
On a bigger picture my three concerns are:
1. The 2-3 day plunge in a number of global markets (look at India (IFN) and Indonesia (EIDO)) along with longer term bear markets in many countries. On the bright side of this, if you are using any of the bear market trend following strategies in The Machine, you’re having a very good run here.
2. The fact that the U.S. is not yet showing capitulation (the sell-off is a bit too orderly and good bottoms are rarely orderly.)
3. The losses in the bond markets are finding their way into equities, especially the higher dividend paying stocks. Should interest rates continue to climb, there will be continued selling in these stocks.
Everything but the metals are oversold and right now everyone around the globe is looking for the Fed to step in as they did in late June. We’ll see if history repeats itself but it may take a few more days to get their attention.
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