Although an equity put/call ratio over 1.0 is ideal for this sentiment indicator to indicate oversold market conditions, the current .91 level is an extreme one. Coupled with the spike in the VIX, today's market bounce is not a surprise.
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| From The Blog of HORAN Capital Advisors |
Further indications of an oversold market are the percentage of S&P 500 stocks trading above their 50 and 200 day moving averages. As the two charts note below, this technical indicator certainly indicates oversold market levels.
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| From The Blog of HORAN Capital Advisors |
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| From The Blog of HORAN Capital Advisors |
Fundamentals drive stock prices in the long run and we believe U.S. fundamentals remain intact and support higher equity prices into year end and at least through the first quarter of 2015. As was noted in the Trahan interview, the U.S. economy seems to be decoupling for international markets and economies. The market does not move higher in a straight line so continued volatility should be expects. As was noted by Bespoke yesterday, the average S&P 500 stock has corrected 13%. With the market down about 6% from its high, some stocks have certainly corrected by a much larger 13%; hence potential opportunity for investors.
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