Today's open immediately vaporized yesterday's gains and built upon the downside steam that picked up with last Friday's nasty sell-off. The culprit today, according to the folks that have to attach headlines to every market move, was renewed worries over Greece's debt and the dollar strengthening further. The S&P is off more than 1% at the moment and has fallen back into negative territory for the year.
We've breached the 50 day moving average and are now trading at the lower bollinger band in the S&P 500. We've also retraced 50% of the up move from February's lows. Continuing the theme of choppy waters we also entered back into the sideways range identified in previous posts and highlighted in the chart below. The best strategy continues to be mean reversion in which fading extremes has been prudent and profitable. Also, downside momentum has accelerated and we're now heading toward some reliable oversold levels. A few more days of selling and we could be at extremes that have served as precursors to recent short term bottoms.
Below are the McClellan Oscillators for the Nasdaq and the NYSE. Considering its recent strength, we see that we're not yet at extreme levels on the Nasdaq. However the NYSE is rapidly approaching territory that we've seen mark the bottoms of many recent pullbacks. Another down day and we'll probably see those levels breached which could set the table for a snap-back to the upside.
