The Dow Jones Industrial Average has declined about 1,403 points over the last five trading days or nearly 13%. If the index continues to decline at this same pace, it will be at zero in about six weeks. I don' think so. The index fell 508 points on Tuesday. At this rate of decline, the index will be at zero in 19 days! The market seems disconnected from fundamentals and fear seems to have taken over.
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On the members section of The Kirk Report website, Charles Kirk noted all of the technical indicators from the SentimenTrader's roundup are flashing bullish. None are giving off bearish readings.
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Additionally, The Kirk Report highlights the oversold sectors from Bespoke. Charles notes that five sectors are trading with no stocks above their 50-day moving average as of October 7, 2008: Industrials, Energy, Health Care, Materials and Telecom. On October 3, 2008, Bespoke indicated there were three sectors that had no stocks trading above their 50-day moving average.
The economy and market are certainly challenged at the moment. However, the recent sell off seems to be extremely overdone. At a minimum, the market could be setting itself up for an oversold bounce.
