Oversold Conditions Deepen In The Stock Market As Breakdowns Worsen

AT40 = 11.2% of stocks are trading above their respective 40-day moving averages (DMAs) (oversold day #2)
AT200 = 31.7% of stocks are trading above their respective 200DMAs ()
= 23.0 (an increase of 44.0%)
Short-term Trading Call: bullish (change from neutral)

Commentary

The market sell-off is unfolding quickly. AT40 (T2108), the percentage of stocks trading above their respective 40-day moving averages (DMAs), plunged ever deeper into oversold territory. This time AT40 fell from 16.7% to 11.2% to end the day at closing levels last seen during the epic January, 2016 sell-off.

T2108

AT40 (T2108) fell off a cliff these past two trading days!

Now that AT40 is so low, AT200 (T2107), the percentage of stocks trading above their respective 200DMAs, becomes a lot more important to monitor as an indicator of longer-term health. The weekly chart below shows the multi-year overall downtrend is well-intact. So just like almost every other rally from oversold levels, I expect the next rally to end at an even lower AT200 high. For now, the question is just how much lower will sellers push AT200.

T2107

AT200 (T2107) last closed this low in early 2016. Sellers still have plenty of room for pressing their points downward.

As the breadth indicators continue to drop deeper into oversold territory, the major indices are following gravity into new or worse breakdowns. The S&P 500 wasted little time in breaking down below its 200DMA. The index stretched further below its lower Bollinger Band (BB) as it neared flatline with its 2017 closing price.

SPY

The S&P 500 (SPY) lost 2.1% to close with a 200DMA breakdown and a 3-month low.

Note well that for 2018 there has only been ONE Fed meeting where the did not tumble soon thereafter. The February

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