Last week it was noted that I have an oversold indicator that through time is highly correlated to The Fly’s oversold indicator. My model reaches oversold when below 30 on a daily basis. SPY was at 29.21 on the oversold indicator when we wrote intraday. QQQ and IWM were in the low 20s.
The problem all last week long was that the score on SPY could not close below 30. SPY did close Thursday night above 30 and I let you know this on Friday at 11:27 a.m. EST when the score was 38 intraday with SPY at $185.88. SPY closed today at $189.44 good for a move of $3.56, not too shabby.
The key point from here is getting the indicator above 50 and staying there. So far so good as the score is 59.19. That will indicate a potential move of 100 to 200 points could be in the cards or 10 to 20 points on SPY.
Wednesday should be a key day to see if we can add some more points to the scorecard. Why? There have been zero 3 day winning streaks in 2016 on the S&P 500. Will this be the first or will it fall into trend.
Personally, I would like to see a down day and then see how quickly the massive number of bottom callers fold. From the ashes of the bottom callers, then we can begin a meaningful rally.
P.S. If you think that shorts are going to help the bulls, NFW. Short positions are light and have been since October, despite what some shoddy research firms are stating. In fact, the shorts are cleaning house by my calculations. YTD the traditional short squeeze name has lost -17.71% while the stocks where the shorts have been correct have lost -19.83% , which means the shorts are up 19.83%. With those types of returns, the “Greek Hedge Dog” can buy himself a nice round of the finest inequities he cares to dabble in.
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