Two Extreme Readings In The Market
- Posted by TheArmoTrader
- on August 9th, 2011
Looking over the SPDR S&P 500 chart, it is quite easy to see that we are “oversold”. But how much have we sold off? Well, I came across two extreme readings that we have not seen in a long long time.
One of the extreme readings is how far we closed from the 10 day Simple Moving Average (SMA). We closed 10.65% away from the 10day SMA. That is the furthest reading we have seen since the 2008 closing low on 11/20/2008 when we closed 13.28% away from the 10 day SMA.
The second extreme reading that I see is in the RSI. While Oversold/Overbought indicators only go so far, I still believe RSI is a good way to indicate how much we’ve sold off. When I see an extreme reading like 90+ or +10, it typically means the reward to the upside/downside of that stock (in this case the $SPY) is limited. We either need a retracement or consolidation before risk/reward becomes favorable again. Today, the RSI closed at 10.16 (according to FreeStockCharts.com). From what I see from another charting service, that is the LOWEST its been since July 23, 2002 and 3rd lowest over the past 10 years (lowest reading on 09/21/2001). Now that is extreme.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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