Rare Extreme Oversold Indicators Triggered

By Lawrence G. McMillan

The market’s still-overbought condition, coupled with some negative news regarding financial problems in Italy, resulted in a severe down day yesterday – a true “90% down day,” as it turned out.  A late-day rally seemed to ease things a bit, but overnight the situation has been exacerbated, and S&P futures are down another 6 points in Globex trading (they were actually down 23 at one point, but positive inflation news out of England brought the markets back a great deal).

The selling has been so severe (and apparently still will be this morning) that some extreme oversold conditions are already appearing.  For example, a 90% day is rare, and that is a short-term oversold condition.  Additional, the Arms Index (TRIN) yesterday was over 5!  That is extremely rare and usually indicates a selling climax.  There are others, but you get the idea.  The question that is foremost, though, is if this is something truly serious and trend-changing, or was it more a case of everyone trying to squeeze out the door at once to nail down some profits from the recent, strong rally...  

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