Extreme Oversold Conditions Already Worked Off

Nothing like a 2% day to make oversold conditions evaporate.   As constantly noted, the most vicious up moves come within the context of selloffs, and yesterday was a wonderful example of that notion.  Friday morning there were extreme oversold readings in a multitude of secondary indicators, and just like that in a session and a half those have been relieved.  Now to be clear neutral is very different than overbought so keep that in mind.  One indicator I often post is seen below:

Since Mr. Fibonacci helped to mark an (at minimum) short term bottom, we can use him in reverse for potential bounce levels.   You can see why these vicious bounces in the market are so difficult – already the S&P 500 has recaptured ~35% of the amount it fell in two months in that 1.5 session time frame (mid day Friday til close Monday!)  But more broadly speaking a range of 1395 to 1420 are key Fibonacci levels for the bounce.  Note we now have a firmly turned down slope on the 50 day moving average which is net negative – although the 200 day remains in a slight upward motion.


Let’s also look at this for Apple (AAPL) since this is the stock that moves entire markets, especially those of a NASDAQ kind.  The stock fell an even $200 so the math is actually quite easy here, even without charts.  Note the 38.2% retrace also fills a gap created by the stock early in the month.


On a news front, France was downgraded late yesterday but markets don’t care right now – as always it is not the news, it is the reaction to the news.