Monday, June 07, 2010

Market Still Short Term Oversold

Just because the market seems oversold, this does not mean it will move higher in the next day or week. I wrote a post on May 31st titled, Seems Like The Market Is Oversold. At that time the S&P 500 Index was trading at 1,089 and closed today at 1,050 or 3.5% lower than the 5/28 close.

What does seem to be the case though is the selling pressure is subsiding in spite of the late day sell off today. Trading volume on these down days continues to occur on successively lower volume days. Additionally, the percentage of stocks trading above their 50 and 150 day moving averages continues to decline. The percentage above their 50 day M.A. is not too far from the percentage reached in March of last year.

With this recent pullback, there are a number of high quality stocks that are trading at attractive valuations and yields. Investors might use this opportunity to initiate or add to these positions if they have cash set aside for equity purchases.

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