The Oversold Rally Marches On. How Far Can it Go?

Analysts at Stock Exchange

The Market

Note: I have never been to Opening Day (that’s baseball for the uninitiated!), and since Thursday is Opening Day for the St Louis Cardinals, I am going. That means there will be no edition of Top Stocks Thursday evening. The next edition will be on Sunday.

Well, that resolved absolutely nothing!

Sure, the oversold (short-term) rally marched on, and the Russell notched its fourth straight day of green, but did it feel like a great rally? It did not, and you don’t need me to tell you that.

The Russell has not gone to five straight green since coming off the November low, so we’ll see if it can give us another day. I still think we’re not yet overbought.

The Transports were up. But I tell you, they acted better when oil was going up than today when oil was heading down. That’s three straight green days for the Transports. And they haven’t gone to four days since December.

The Bank Index was up again, notching in five straight up days. They haven’t done more since December either. And finally, the SOX has been up three straight days, and it hasn’t gone to four days since December.

I share these continuous number of days with you so that you can understand how, by Friday, many of these groups, especially if they give us green days Thursday and/or Friday, will be short-term overbought by the end of the week.

Volume today was incredibly light, but I don’t expect it to stay that way. Tuesday will bring us the final day of the first quarter, and I expect there to be rebalancing as we head into the end of the quarter, which should bring us some more volume.

Speaking of volume, the Volume Indicator is shown below and remains at 48%.

Lastly, the Investors’ Intelligence bulls are now at 39%. This is where they were in May and June of last year. At the April 2025 low, they got to the low 20s. That was panic. This is just general gloom.

The bears are up to 25%. They got to just over 35% in April of last year. But while I wouldn’t call this panic, I would once again note that the change in sentiment is ultimately positive for the market. We’ve done a lot of work to change sentiment.

New Ideas

I want to follow up on Amazon (AMZN) , which I was asked about last week. I noted that as long as 205 held the stock would be okay. It has thus far held. I think that reinforces that this is your stop.

We’ve looked at several of the chemical stocks lately with positive eyes (LYB and DOW come to mind). To that, I would add Air Products (APD) if it can get over this 295 area; it would be impressive.

Today’s Indicator

The Volume Indicator sits at 48%

Q&A/Reader’s Feedback

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Axon Enterprise (AXON) has filled the gap from February and has support at the line (around 440), so it ought to bounce, but this is not a good chart in my view. There is no base to speak of. If it is still sitting in this area a few weeks from now, maybe it shapes up better, but right now just a short-term rally.

Oracle (ORCL) is getting a little oversold and has support in this 140-145 area, so I’d expect a bounce, but that’s it. There is no base, and support is tentative. This is just short-term stuff as best I can tell right now.

If Microsoft (MSFT) can get down to that 360-65 area, I’d be okay with buying it for a trade because it would be bouncing off that line, and there is a small measured target that shows up around there. And it is getting grossly oversold. It would even fill that tiny little gap from last April.