The recent slump in the market occurred rapidly and indicates oversold conditions. My preferred method of monitoring — and acting on changes in — momentum in the market is the Stock Market Momentum Indicator (SMMI), as constructed and calculated by CRB. I had been anticipating a signal and it finally appeared after yesterday’s close.
The last time this indicator flashed a buy signal was on August 31 of last year. I wrote about the signal at the time and gave my reasons for taking action cautiously. In short, the market was still near peak levels, a credit crunch was starting and the economy seemed to be heading towards a recession. The caution was warranted, as the signal, which closed on May 29, turned out to be the only unprofitable such signal since the indicator’s inception in 1994. Read the rest of this entry »