The declines of last week have pushed the major indicators firmly in oversold territory. Conventional wisdom dictates that when this happens, we should get a bounce. But, as we’ve seen in the very early part of this year, we had similar technical conditions and yet the market broke down violently after a short consolidation.
The market has been driven by fear of late, and this increases the likelihood of an ultimate move down after a consolidation that lasts a few sessions. An intervention by the Fed, however, will alter this scenario.