Oversold and…

Yesterday, we wrote a note that after 5 straight days down, markets were getting oversold. Oversold conditions lead to bounces. One just does not know when or where the bounce will occur…but just that is is getting closer. On top of that, something else happened in the past day. After weeks and months of us telling you about all the deterioration in the market, we noticed that everyone else was joining the bandwagon yesterday. We repeat, after weeks and months of deterioration, the reporters are now finally reporting what has been going on for a while. This also has us believing a bounce is due.

But leave no doubt, markets need a goal-line stand. Many important areas have buckled.  The DOW and NYSE are firmly below the 200 day moving average. Other indices are no great shakes. We now key on the 2040 S&P. A break below just worsens things. The relative strength has been the NDX/COMP. The COMP broke the 50 day yesterday with the NDX getting close. There are still a good number of glamour names acting well in this narrow market and so far, thinking this continues. But eventually, narrow is not a good thing.