Another Oversold Indicator

By on February 3, 2010

The market had a nice correction and a number of indicators showed it was due for a bounce. Bespoke Investment Group pointed out that the 10-day average of volume in NYSE listed stocks trading higher as a percentage of total volume was more oversold (35%) than anytime since November.

Bespoke further explains:

Compared to the average reading of this indicator since 2002, the current level is two standard deviations below normal. In the charts below, we show the S&P 500 and the 10-day average upside volume on the NYSE. On the chart of the S&P 500, we have also included red dots to show each time upside volume was at least two standard deviations below average. As shown, most (although not all) of these readings have occurred near short-term lows. In fact, in the week following these instances, the S&P 500 has averaged a gain of 0.89%. Over the next month, the S&P 500 has averaged an even greater gain of 4.3%.

Click on chart for larger image:

Source: Bespoke Investment Group
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