It never ceases to amaze me how obsessed folks are with, "Was that the low?" or "Was that the high?" questions.
As if anyone really knows.
I have been working in this business for nearly four decades, and I can tell you that I will never know if that was THE high or THE low until after the fact.
And typically, by the time it feels like you know, and there's more certainty about it, complacency or fear has probably begun to creep back into the market. What I try and do is identify when the ingredients are present for a rally or a decline. My timing is rarely perfect. In fact if it is perfect, consider it pure luck and nothing more.
What Wednesday looked like to me was all part of what I am trying to identify as an oversold bounce. The McClellan Summation Index's "what if" reached an extreme oversold condition after Monday's trading, when it got to the point it needed a net differential of plus 4,400 advancers minus decliners to halt the current decline.
The Nasdaq Momentum Indicator, where I have plugged in a decline of 200 points over the next several days to see what the indicator will do, shows the indicator stops going down and starts to go up on Thursday. That's what makes this indicator oversold.
My own Oscillator is not as clear cut. It is based on the advance/decline line and the math stays it won't be at a "good" oversold condition for another week. But I can make the case that it, too, gets a little oversold Thursday.
On the sentiment front, the put/call ratio was high at 126%. It was the highest for this decline -- yes, higher than Monday. That has moved the 10-day moving average up. It's not extreme, but it's finally lifted.
So the ingredients are in place for an oversold rally. But as I explained yesterday, the intermediate-term indicators simply do not get oversold that fast. They need time, which typically means we rally and come back down. So that's still my game plan.
I was asked about gold. If we do a measured target off that base, we get something around $142 (take the high of the pattern at $127 and subtract the low at $112 and we get $15. We add $15 onto $127 and get $142). In addition, the Daily Sentiment Index (DSI) got to 97 on Wednesday. I think it needs a pullback. What would make it bearish is if it gaps down and leaves Wednesday's trading as an island reversal.