Oversold Condition Starting To Attract Buyers

There have been signs since Wednesday that some of the more oversold stocks are running out of downside momentum. The QQQQ, SMH, and have recently sliced through their respective 200-day averages like a knife through butter. Panic ensued and stocks were dumped more out of fear than from reason. A quick study of index history shows however that the 200-day average is not an area that falls quickly. Bulls will battle back for this average and further selling is going to get swept up by smart money who understand this. Who will win the battle is yet to be determined. It is almost a sure bet however that prices will start to bounce back up as the battle back from the lows begins. If bulls have enough weapons in their arsenal we could see a rally ensue from the ashes. If not, and prices merely limp back to their 200-day averages, then we are likely to see the downtrend resume. Right now however it pays to bet on the bounce; after which we will wait and see what develops from that bounce.