New lows

I'm going to point out just how unusual the breadth extremes were the week before last. The only time in the last 10 years that have seen new lows on the NYSE spike higher was the bottom of the 98 decline. On Thursday Aug. 16th the new lows hit 1132. There are 3453 stocks traded on the NYSE. That means 1/3 of all stocks on the NYSE hit new lows on Aug. 16th. That is a sign of extreme panic. I think we've all learned by now that panic is almost always an opportunity. We all know that the market reversed big time on that day and then rallied big the next day. As a matter of fact the next day was a 90% up volume day. Most intermediate rallies start with a 90% day. I strongly believe we saw the internal low for the decline on Aug. 16th. As of today the new lows have totally collapsed back down to 16. We may very well see the market drop again and new lows may move even higher than 1132 but let's just say I have strong doubts as to that happening. If the market holds here then we should have hit such an oversold level that the ensuing rally could be quite impressive and that's exactly what the historical precedents would suggest.