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Thursday, March 5, 2009

Markets Are Now Ominously Oversold

Well, it had to happen sometime... that one green day.

As I've mentioned repeatedly equities are Extremely Oversold and only getting more so. I also warned that the really scary rinses tend to happen from deeply oversold levels. The market has been methodically grinding lower, hitting one new low after another. In fact, it's almost Boring! Without panic, you can't trust the low to be a bottom. To date, there has been No Panic Yet, No Capitulation Yet.

With only 1.4% of all stocks above their 200 day simple moving average, everything is still in probable 'crash' territory.

Friday will be the big day. Non-farm payrolls is likely to be the catalyst for a cathartic and necessary final panic liquidation down...


Leo Kolivakis said...


Correct me if I am wrong, but the last few terrible employment reports were a catalyst for major market rallies.

Also, historically, after taking a severe beating in Q1, markets rally sharply in Q2.

Are we heading towards the Mother of all bear market rallies in Q2?

Stay tuned...



Anonymous said...

ben, you shouldn't be using a log scale on that chart, 1-100% isn't log (well not in my book).

And, you'd expect a200r to bounce along the bottom in a down trend just as you'd expect it to bounce along the top in an up trend.

Basically I think you are reading this wrong. In a down trend you use this chart to find highs in a200r and sell them.

When it gets to be an up trend then you can look for the lows and buy them. But not now.

Anonymous said...


While I agree that Friday will be mostly down, don't you think at least 800,000 is already baked into the numbers?


Ben Bittrolff said...

@ Anonymous,

I use the log scale so I have room on ths chart for comments etc. I'm actually interested in the absolute values.

What I'm saying with this chart is that equities are extremely stretched to the downside, so much so that rather than expect a snap back rally (which tended to happen with a200r was a low, but at much higher levels), there is now an increased risk of a sudden "crash".

Ben Bittrolff said...

@ SS,

Baked in... perhaps. I still think it is less risky to stay short into Friday (especially after having taken profits along the way) and then wait for the market reaction to the numbers.

I am increasingly concerned that we may not make it out of these extremely oversold conditions with a classic bounce. The system is under so much stress, that this time we may actually "crash". (Defined as cascading waterfall of big down days in rapid succession.)

Anonymous said...

Wall street now the enemy of Main street: main street's destruction in Wall Street's profitable interest?

how is this good for society?

Anonymous said...


Thanks for all your help and excellent writing. I too am staying short. There are a lot of long only investors who bought into "stocks for the long run." They will only will sell with time and repeatedly lower prices, their selling will, on average with a few bounces from time to time, offset any short covering.


Anonymous said...

Ben, define "final" in your post

This is not your fathers stock market

Anonymous said...


Would you consider today a rinse? Or are we waiting for something bigger and badder?

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