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Oversold Short Term Buy Signals

By Lawrence G. McMillan

The following was excerpted from the market commentary in this morning's Daily Volume Alerts Newsletter, which is sent out each morning before the market opens.

Even though the market didn’t close very strongly on Monday, the modest rally had some underpinnings that make it likely to continue on towards the 20-day moving average of $SPX (currently at 1297).  First, the CBOE equity-only put-call ratio returned to a more normal reading of 0.57, and that should produce a short-term buy signal.  Second, $VIX fell below 20 (barely), but it has now fallen far enough from last Thursday’s peak to create a short-term buy signal as well.  Also, the total put-call ratio dropped to 0.79.  That alone is not a buy signal, but it is the lowest reading in a while and may signal that the peak is in for that ratio.  We will monitor it closely now, because if the peak is in, it would be for more than just a short-term signal...

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