Mean Reversion is a happening thing

The Russell 2000 is the first U.S. index that I watch to hit a ‘buying range’ which attracts my interest.

Today, it closed at 1,718 points.

It also falls into the category of being the first one down and the first to ‘bottom’.

The weekly chart below shows the RTY marrying its trading below its 200 week moving average (i.e. long term mean reversion has been satisfied) together with registering a weekly oversold reading….

It’s the 10th occurrence in 32 years, but this market and economy doesn’t feel like the 2001 tech crash, the fallout of the 2008/2009 GFC nor the unknown of a 2020 pandemic outbreak.

……..then for the stockpickers out there, there is a host of oversold carnage (bargains) to pick from.

The next indices closing in on the same milestones include the KBW Banking Index, the MidCap 400 and the Nasdaq Transports.

May 12, 2022

by Rob Zdravevski

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