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On the daily chart, the 14-day Relative Strength Index (RSI) sunk deeper into oversold territory, now at 16.77, the 12th lowest reading in the past 50 years. Of those 11 other events, which include the crash of 1987 and the 2001 tech-bubble decline, the S&P 500 Index has closed higher 73% of the time the following day, averaging a gain of 1.85%. Results one week following the oversold low were even better, gaining an average of 4.22% and positive 82% of the time. Bottom line is that the sharp decline in the equity market is unsustainable and a rebound rally should be expected, alleviating the oversold condition and potentially generating significant short-term gains. What the benchmark does following the bounce varies. The oversold low in 2001 resulted in a V-bottom following a year of a downward trending market, while 1987 and 2011 saw a retest of the lows within a 2-month period that followed before the longer-term rising trend resumed.
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