Saturday, November 22, 2008

A Historically Oversold Market

This past week, the Dow Jones Industrial Average traded about 34% below its 200-day moving average. This eclipses the oversold conditions from the post WWII era. Indeed, as the chart above indicates, since 1902 we've only had one period of greater oversold conditions: the Depression market of 1932. Looking for market bottoms using historical analogues from modern markets has been hazardous to investors' wealth.