The extreme intermediate-term oversold condition highlighted in our oversold playbook suggested the initiation of a difficult bottoming process driven by a sharp oversold rally, followed by a retest of the low once the oversold is no longer as extreme. While the election is now upon us and there is a friendlier tone between the U.S. and China regarding trade, the main driver of the 5% bounce in the S&P 500 (SPX) off the 10/29 low has clearly been the extreme oversold condition. With over 70% of SPX stocks back above their 10-day moving averages, the extreme selling has significantly reversed, setting the stage for a retest over coming days/weeks.
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