Individual stocks are under pressure, there’s no doubt about that. It’s been a long time since we hit back to back oversold levels in stocks in such a short period. We were a little oversold last week, and that led to a short-term four-day bounce that disappeared in a couple of hours.

Without a doubt, this is a change in character, previous one-day selloffs were followed by V-shape rallies that lasted weeks. Individual stock set-ups have been non-existent for days. Seasonally, we are in a weak volatile period as you can see in the chart below. Forget about taking cookie-cutter breakouts and look for mean reversion plays.

The amount of SP500 stocks above their 3,5, and 10-day moving average is at a somewhat oversold level, but it can get a little more oversold before a dead cat bounce. The tape feels heavy, and this looks more like the beginning of a down move than the end of one.

Here is the bottom line; know your timeframe, trades are trades and investments are investments. Don’t turn a swing trade into an investment just because you are down and don’t turn your long term asset allocation to index ETF’S into a short-term trade because of a natural pullback.

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at or 646-480-7463. 

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