The S&P 500 stock index ended the third quarter down -25% for the year and printed its worst performance through the first nine months of any year since 2002.
Clearly, investing in stock market index funds that are fully exposed to stocks all the time involves risks you must be willing to bear.
The good news is the stock indices are now oversold as measured by our relative strength indicator, which means we expect a countertrend back up at least temporarily.
Looking inside the broad stock index that's invested in 11 different sectors, we see the Consumer Cyclical sector is one of the most oversold.
The percent of stocks in the S&P Consumer Cyclicals above their 50-day average price is zero. When a sector gets so washed out, a countertrend trader starts to look for reversals, then a trend-following trader enters if the price trends up enough.
I shared on Twitter, "The stock market is in oversold territory. We should see a counter-trend reversal."
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