fbpx Oversold rally? | Option Strategist
Home » Blog » 2011 » 08 » Oversold rally?
By Lawrence G. McMillan

The rally that was underway a week ago ended abruptly, and the Standard & Poor’s 500 Index traded back down to its lows at 1,120. After a few days of testing that area, during which the index closed near that 1,120 level each day, the market has rallied. This rally was initially supported by extremely oversold conditions, but has begun to garner some other buy signals as well.

Let’s review the indicators.

The chart of S&P 500 Index SPX -1.05%   is still quite negative. It is trending lower, with lower lows and lower highs. The one bright spot is the support at 1,120 (the intraday low was 1,100 last week, but the closing low was 1,120, on several occasions). In fact, since the 1,120 area was tested on two separate occasions, a week apart, that might qualify as a retest of the lows (personally, I think there will be further retests, but it is a possibility that what we saw this week was indeed the retest)...

To read the full article, subscribe to The Market Watch Options Trader.