U.S. Markets Aren't Oversold -- Part 2
Tiho Brkan | Jul 02, 2015 01:20PM ET
Today's chart focuses on the US stock market's breadth. In my previous two posts -- here and here -- I looked at two different measures of breadth: 1) new 52-week highs and new 52-week lows; and 2) advancing vs. declining issues together with up-vs.-down volume.
Further drop in price could get us short-term oversold
Source: Short Side Of Long
The question I'm still asking: has the broad U.S. stock market become oversold? The answer is 'no, not yet'. Definitely not from the long-term perspective; however we are slowly approaching oversold territory from the short-term perspective judging by several indicators.
One of which is the 52 week new-highs-vs-lows ratio. Oversold level is reached when the weekly average seen above (5-day average) falls below 20%. In other words, sum of new 52 highs for the 5 trading days is only 20% of that of new 52-week lows.
Extremely oversold level is reached when the gauge gets below 10%.
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