We often use our oscillators to describe the short-term momentum. You can see what has transpired since early February as this short-term yellow light was turned on.
You can see a loss of momentum, and you can also see the blue line (McClellan Oscillator) has now dropped to its first line of defense (under -50). Based on this, the stock market "could" bounce here, but that does not change our methodology at all. In our opinion, "it's not over yet."
You can also see another gauge below we sometimes use to see what is evolving internally in the stock market.
Like so many other overbought/oversold indicators, you don't bet the house on their signals. In fact, bull markets can remain "overbought" for long periods of time. The oscillators tend to work best on the extreme oversold buy signals you get every once in a while. But on both sides of the overbought/oversold aisle, they do often work as a guide to complement other more dependable parameters. As of yesterday's market, as shown above, we now have the percentage of stocks above their 50-day moving average back down to 62%. That is good, but in "most" cases the healing must continue until this drops under 40% at a minimum. This is also telling us "it's not over yet."
The bottom line? All good (or bad) things must come to an end, but the indicators above are telling us that "it's not over yet."
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