After the swift rise the stock market had in the first quarter, we were due for a pullback. Now the market’s oversold and ready for another rally.
The Oscillator
The Overbought Oversold Oscillator is showing the stock market’s oversold as of yesterday. Yesterday’s action was also depressing — investors were nervous and some panicky. Panicky is a good sign — it means the market is set to climb.
Although we are oversold right now, the market’s not completely washed out. We could be in store for more weakness this week, but that looks to be about it.
DJIA
Holding the Oscillator above the chart of the Dow Jones Industrial Average shows each oversold reading has correspond with a low in the market.
Another thing I notice is the DJIA is hitting support here. You could connect the dots to the three recent market declines (which are around Dow 12,750). I think this support level will hold, and we will go up.
Sharek’s Take
I knew the market was overbought at the beginning of the quarter and was due for a decline. That call was dead on (although I should have done more selling when things were good). Now we are close to or at a bottom and I think the turn up comes this week. The stock market’s good for buying.
