The average RSI(14) of Dow 30 stocks fell from a high of about 69 to a low of 34 in six days. This is a violent correction but at the same time it offers hopes of partial recovery at least before the fate of the market in the medium-term is decided.
The average RSI(14) of Dow 30 stocks also fell close to 34 at the bottom of the financial crisis in March 2009, as shown in the chart below:
Obviously, the speed by which this indicator collapsed is impressive as it took only six days. This is another indication that the world of finance is getting faster.
A rebound is highly probable from these levels but medium-term direction may be decided in the future after traders and investors weigh the momentum of the rebound versus that of the correction that has just occurred.
In my opinion traders and investors should get used to violent and fast corrections because they will be occurring more frequently than in the past.
If you have any questions or comments, happy to connect on Twitter: @mikeharrisNY
Charting and backtesting program: Amibroker
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