Stocks Rebound from Massive Oversold Conditions
November 24, 2008
Oversold conditions spark a sharp recovery as shorts covered their positions
We’ve seen this story more than once, a sharp massive recovery after setting new lows. The huge % gain on the day came on volume but it wasn’t accumulation from insititutional investors. Big boys do not like to run up the price on themselves and chasing anything beyond 1-2% beyond their buying levels. Stocks are simply oversold, not as oversold as they were on 10/10 but nonetheless oversold. Look for the market to have a relief rally heading into this holiday week and volume to be on the lighter side. Any longs remain suspect and your losses should be cut short. Keep a tight leash on everything and do not let losses run wildly.
This market has a ways to go, I am looking for the S&P500 to finally end up around 400-500 and the NASDAQ to find its bottom between 800-1000. In the coming days I will review each index and the history of P/E contraction during economic recession. Remember, human emotion will always overreact to certain conditions within the market. Our best defense: CUTTING LOSSES.
These are interesting times, you should use this rally to setup new short positions no matter what kind of Bargain is out there.
Enjoy,
MS
Stocks Rebound from Massive Oversold Conditions
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