The stock market has become extremely volatile, trading up and down
hundreds of Dow Jones points in a day. But our indicators have remained steadfastly bearish throughout the last few weeks. For example, despite several big rally days, $SPX never broke the downtrend line that connects its series of lower highs. Until that downtrend is broken, the $SPX chart will be bearish.
Equity-only put-call ratios remain on sell signals. The charts in
Figures 2 and 3 show that the ratios are racing higher now. As long as
they are trending higher, they are on sell signals.
Market breadth has been swinging wildly back and forth. Six of the last ten days have seen +/-2000 breadth. That is quite unusual. Both breadth indicators are on sell signals, and both are in oversold territory. However, the market can
continue to decline sharply even while oversold.
In summary, the intermediate-term indicators are all bearish, so
even though oversold conditions are setting up potentially strong buy
signals, do not act on these buy signals until they are actually