September 15, 2008 Recap: Still Not Oversold

One can just look at the NYSE Composite down 5.09% to know what kind of day this was -- a great one to be a bear. The selling was widespread and intense. The only sector that I see up on the day was airlines and that was only up 0.12%. Financials obviously led the way down today with a 9.74% drop in the XLF. Energy wasn't far behind with a 7.66% drop. But what really got my attention was the Russell 2000 finally getting hit. Over the last week or so I kept talking about how I thought we couldn't truly bottom until all stocks got hit. It looks like we're heading in that direction now. (BTW, it's supposed to say "mucK" on the chart below, not "mucH".)

Note that all of the indices are not giving oversold stochastic readings yet on my very short-term settings. I am seeing signs of the market becoming oversold on a longer time frame though. A couple of hours ago James asked me:

what do you think of the fact that a high percentage of S&P 500 stocks are still above their 50 day MA…? Was just looking at the chart on stockcharts

That SPXA50R James is referring to is very similar to the T2108 indicator that I like so much. Recently I've pointed out that it was still far from it's oversold level of 20 thanks to the continued strength in certain sectors. Well today T2108 took a dive and closed at 21.48. So we're basically at the point where you almost have to become a buyer or at the very least cover your shorts. And once again I'm worried for all the folks hitting this site from searches for "inverse ETFs". It's kinda late to just now be initiating shorts for anything other than very short-term trades.

The Nasdaq had a smaller percentage loss than the other indices. It continued its walk down the lower Bollinger Band (not shown) today while managing to hold above its 2008 lows.