U.S. stocks became oversold after a sharp sell-off, while emerging markets entered bear market territory.#-ad_banner-# Stocks Oversold After Three-Day Sell-off SPDR S&P 500 (NYSE: SPY) fell 2.13% on Friday and was down 2.59% for the week. Friday’s sell-off left the major market averages deeply oversold. The chart below includes Bollinger BandsR along with prices. The Bands are placed three standard deviations from the 20-day moving average instead of the standard setting of two standard deviations. Two standard deviations should contain 95.45% of the price action, while 99.73% of the price action should occur within the… Read More
U.S. stocks became oversold after a sharp sell-off, while emerging markets entered bear market territory.#-ad_banner-# Stocks Oversold After Three-Day Sell-off SPDR S&P 500 (NYSE: SPY) fell 2.13% on Friday and was down 2.59% for the week. Friday’s sell-off left the major market averages deeply oversold. The chart below includes Bollinger BandsR along with prices. The Bands are placed three standard deviations from the 20-day moving average instead of the standard setting of two standard deviations. Two standard deviations should contain 95.45% of the price action, while 99.73% of the price action should occur within the Bands when they are set at three standard deviations. Friday’s close, more than three standard deviations below the average, is expected to happen 0.27% of the time, or once every 370 trading days (about 18 months). Prices drop below the lower Bollinger Band a little more often than expected. This has happened 17 times since SPY began trading in 1993, or about once every 15 months, on average. Buying after prices fall this much would have been profitable in the short term. One week later, prices were up an average of 1.73%, and 67% of the trades would… Read More