[ad_1]
Notice how oversold instances don’t last long. Also notice how the market, using the exchange-traded fund SPDR S&P 500 ETF Trust (SPY) as a proxy, tends to rally after oversold instances.
This is today’s bright spot – the tariff news could send the BMI to oversold territory. Historically, those who buy then reap rewards down the line.
What Happens After Oversold
It takes a lot of carnage for the BMI to hit oversold. And there’s a lot we could discuss about how it gets there – interest rates, macroeconomic conditions, and so on.
But let’s focus on Big Money because that’s what drives markets.
I mentioned a few weeks ago how with Big Money, forced selling precedes forced buying. Keep in mind, since 1990 (including backtesting), the BMI reached oversold only 25 times.
Again using ETFs as proxies – SPY for large-cap stocks, iShares Core S&P Mid-Cap ETF (IJH) for mid-cap stocks, and iShares Core S&P Small-Cap ETF (IJR) for small-cap stocks – stocks of all sizes suffer as the BMI falls. But look at what happens after oversold:
[ad_2]
