Things got quite oversold Monday morning as the indexes opened lower amidst continued heavy selling in the tech sector. I tweeted early in the day that an oversold bounce was becoming more likely. At the time, this was showing up on the 5-minute “620” intraday charts in the form of MACD “stretch & cross” types of moves.
That’s the first thing I look for when things start to get oversold, and it may in some cases coincide with undercut & rally types of set-ups on the long side. By the close on Monday, the oversold bounce had come to full fruition once the NASDAQ Composite Index had cleanly undercut the late May low.
That triggered a short rally that ran out of momentum today as the index churned around the 20-day moving average on lighter volume. The action following the Fed policy announcement was quite wild, with the NASDAQ selling off over 60 points before finding its feet to close -24.75 to the downside, or -0.43% on lighter volume. This avoided a distribution day, but a number of big-stock NASDAQ and tech names were knocked off their highs, giving the underlying action a bit of a black eye.
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