For Whom The Deep Oversold Bell Tolls (again)
Musing on the Markets

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Beyond The Sound Bite

Consume the FeedMy Beyond The Sound Bite audio interviews are now available via Podcast on InvestorsInsight.com.  Consume the feed here.

Have You Seen This?

Have You Seen This?

Whatever the fundamental rationale may be – November 15th and hedge fund redemptions; capital gains sales in anticipation of tax increases next year; fears of a global recession; concerns re FAS 140 and QSPEs (more on this one in a future posting); S&P 500 earnings closer to $50 with a 10 or less P/E – the technicals of the market are once again on the verge of signaling another strong non-confirmation low. 

As the accompanying chart shows, the deep oversold in Slow Stochastics (below 20) combined with a vastly improved Momentum and MACD readings point to a bell ringing non-confirmation low. In my experience, when combined in this fashion these indicators have a > 80% probability of success. And when they fail, the worst-case result is breakeven. 

Investment Strategy Implications

Will this time be different? Perhaps, but only the nightmare scenario of plunging earnings and deflationary level P/Es justify lower prices.





Posted 11-12-2008 1:40 PM by Vinny Catalano, CFA
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