It takes a lot to get the market this oversold, and usually it comes on the heels of the bulls becoming completely exasperated. 

And that is what happened today when the bears drove this market another 65 points down on the S&P 500 following yesterday’s Fed sell-off, which happened to be the worst reaction ever to one. 

The T2108 is an indicator that I closely monitor in these market environments, and tends to provide near perfect timing for getting long on a market that is way oversold. Well that reading came about today when only 6% of stocks traded above their 40-day moving average. 

On this particular indicator, I like it any time it reaches single digits, because that is when the bulls start dipping their toes in the water once again. Once that reading was seen, I added Netflix (NFLX) at 2:29pm eastern and Amazon (AMZN) as well. 

These kinds of readings are what you see following the sell-off in February and October, but of which the T2108 broke below. From a historical standpoint, think of the January 2016 sell-off, and August 2015 sell-off. After that, nothing even close until the Summer European banking crisis in 2011. So that gives you some perspective of how rare these moves are. 

There’s no guarantees in this market, but where the readings are that low, the reward far outpaces the risk for the trade. Right now I am in positive territory on both trades, and we’ll see how well they do going into the close. 

t2108