with most of the action centered around financials.
Many investors rushed back out of equities and bought the very secure 10 Years Treasuries.
As a consequence, the 10Y rates dropped from 4% to 3.82% and combined to the markets pullback, we can see below that equities are now just above their overvaluation level.
In fact, this does not mean that equities will bounce from the current levels. I believe that investors will continue selling until equities become substantially undervalued in terms of yield. This probably means a price target on the $SPX of $3800 or even lower.
We can see below that seling panic has not even started as the NHNL indicator is just barely negative.
Conclusions:
I would follow the two indicators below before buying:
1. The number of days until a short signal is issued should fall below minus 2.5 days and then break above that level. This would signal selling exhaustion.
2. Similarly, the market TEV extension indicator should also fall below -5% and then revert back above that level.
In terms of time frame, next week is options expiration, which is usually volatile, but positive for equities. Hence, I'd target end of next week to buy oversold stocks.
