Oversold Bounce

Please click here for a chart of  Nasdaq 100 ETF (QQQ).

  • The chart shows that coming into today RSI was very oversold.
  • When RSI is this oversold, it is a good setup for a bounce.
  • Economic data this morning was very negative for the stock market.
  • All of the buying today is from the momo crowd.
  • In spite of the bounce, smart money is not buying.
  • The bounce should be used to properly align the portfolio with current market conditions.  Please see the protection bands, cash and hedge levels in today’s Morning Capsule.
  • The chart shows Arora signals to take partial profits and not start any new positions just before the decline. Signals don’t get any better than this in real life. These spot on signals follow the Arora signal on February 11th to sell momentum (momo) stocks.  February 12th has turned out to be the top in momentum stocks. Since the Arora signal to sell, many momo stocks have lost 40 – 90% of their value.

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