Market Oversold; Time for a Bounce? (ETF: SPY)

Nick Perry (Schaeffer's Investment Research) submits: It seems like the selling has reached a point where a small pause might be in order. In scanning through my charts, roughly three-quarters of my ETF list are near oversold levels, as measured by a short-term relative strength index (RSI).

I ran some quick numbers and it looks like there have been two other recent periods with similar levels of oversold ETFs - late-March of this year and August of last year. As you can see in this weekly chart below, both of the periods were near short-term bottoms.

As anyone who has worked with RSI indicators can tell you, overbought and oversold conditions can become much more overbought or oversold. However, it does at least suggest that the selling may need to "rest" for a short-time. In next week's column we will see how accurate this indicator is...

Nick Perry ([e-mail])

Related:

• Other articles on the Seeking Alpha Network by Nick Perry
.
• Other articles from The US Market Blog.

« Any opinions expressed on the Seeking Alpha sites are those of the individual authors and do not necessarily represent the opinion of SeekingAlpha or its management. »