But is the market oversold in the short-term? Is there too much bad news priced into the market? Are certain indices at extreme points, ready to bounce against the bears? Is it time to put in a trade on the long side?
The Dow has 4 out of 30 components trading above their 50-day moving averages. Using the $DOWA50 chart at stockcharts.com, I found that when 4 or fewer components trade above their 50-day moving averages, it's time to look at going long.
Which four companies are fighting the tape? Alcoa, Chevron, IBM, and Wal-Mart. However, IBM is trading only $.04 above its 50DMA; WMT is $.56 above its 50DMA. Only AA and CVX have a cushion of more than 1% above their 50DMA. If tomorrow's a down day, then the $DOWA50 chart will scream "go long." I'll try to follow through by closing out my DXD position, and shifting those proceeds into a position in DDM.
The Dow is at a tradeable extreme. How about the Nazz and S&P 500?
The even-broader S&P 500 has 168 components trading above their 50-day moving averages. I won't be interested in the $SPXA50 indicator until it falls below the 75-100 range.