I Am Out, Taking Gains On Recent Buy And Going Home

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 first wrote intraday about it. 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 is now at $192.03 good for a move of $6.15, not too shabby.

The key point in our last update was getting the indicator above 50 and staying there. The score yesterday got above 70 and failed to hold that level. In fact, the score has not moved above 70 since late October. This is bad. Failure to launch and stay above 70 is the killer of bear market rallies. Prepare to reenter the ark.

Today we are failing at the 38.2% retracement from the November high on SPY to the January low, $192.72. This is a huge warning sign to me and therefore I am out for being a  buyer of this rebound.