The Stochastic Signal That Will Trigger the Bounce

By | January 19, 2016

I have been highlighting the efficiency of the stochastic oscillator in identifying short-term trend reversals in the S&P 500 index for the last several months. When the oscillator makes a crossover in an overbought or oversold condition and then moves out of that zone, the index is likely to see several days of countertrend action.

99978.SPXchart

Currently, the index is testing the August and September lows and is attempting to stage a bounce at this key technical support level. The stochastic oscillator has made a bullish crossover and is rising but is still in an oversold condition.

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