technically, stochastics can turn around and point to overbought just as fast as they can turn around and point to oversold...
Rumours of large bank collapsing, hedge funds having their loans called. http://business.timesonline.co.uk/tol/business/economics/article3508468.ece One senior banker in London said: âThis is the beginning of the real credit crisis and itâs not going to end without a major casualty.â
Take a look at the daily charts of SPX, COMP, DJIA. Look at the RSI, Stochastics. They are all in the oversold territory with readings less than 20. Also look at the Jan 23 rd bottom and that is a support level there. The market can retet these lows and reverse with a rally/ Next week Fed may cut rates.. I donot worry about markets I just read the data as presented to me.
The stochastics can tell you that that market is CURRENTLY oversold but a 1-2 day rally could bring it back over 80 and then your overbought, so stochastics is a very limited tool imo
Every indicator has its limitations. But stochastics is a widely used market timing tool. Traders use it to enter and exit trades. It took 8 sessions of selling to bring stochastics down to oversold levels of less than 20. SPX dived 90 points straight down. How much it will take to get into overbought conditions? Just about the same and the indicator can stay overbought for a long time. But than we have 10, 21, 50, and 200 day moving averages and February lows as resistance above SPX to deal with. My point is market is oversold and it will reverse in a rally, how long that will last I donot know.
Please add these to your post: Sky is falling.. Titanic is sinking This over now Real estate will never come back We are done We are in a recession and this will never end We are entitled to things we donot deserve.