Simulpost from

Posted by downtowntrader | 3/10/2008 11:09:00 PM | 0 comments »

One of my most reliable indicators for identifying when the markets are getting oversold is Worden’s T2108 indicator. I’ve written extensively about it in the past, but basically it measure the percentage of stocks trading above their 40 day MA’s. It dipped below the important 20% level today. While this doesn’t mean the markets will bounce right away, it does mean stocks are being sold to historically low levels. It also doesn’t mean the market will put in a bottom and resume the bull market either. But when bearish sentiment gets to the extreme, it becomes unsustainable and gives way to a bounce back rally. We still haven’t had a capitulation day though, and I would prefer to see that. I thought we might get one tomorrow with TXN lowering the profit forecast and subsequently taking chip stocks down in the after hours, but our futures are currently pointing to a higher open. Maybe we get a 2 or 3 day weak bounce before the flushout. Kirk had a great post tonight with similar thoughts on where we are in the markets.

Good Trading,