Above: GST Oil Service Index with Medium Term ARMS Index remains heavily oversold
above 1.30.
0916.02
Above: Oil Service Stocks with Summation Index moving down to fully oversold condition as prices near the lower band.
0916.03
Above: Oil Drillers and the 100 day RSI, very medium term down to oversold territory.
0916.04
Above: ARMS Index for GST Oil and Gas Stocks. Plotted inversely, this gauge reflects an oversold condition when the indicator is near the upper horizontal line as it is now.
0916.05
Above: Oil and Gas Stocks with long range Summation Index down to oversold levels with
prices right on lower band.
0916.06
Above: Up to Down Volume on Energy stocks with the index holding just above the lower band.
In addition to the energy sector, we see that the Natural Resource sector – taken as a whole and including Refiners, Precious Metals, Base Metals, Coal, Nuclear etc. - is at the present time pushing the ultra low end of the historical range. In the chart below, I update a chart of the GST Stagflation Index, an index made up of 150 stocks from all areas of the natural resource world. On the bottom clip is a composite overbought/oversold indicator which is the sum of many indicators for this sector. Note the current readings well below –5.00 which is the fully oversold threshold. As a collective universe, resource stocks at the current time are as oversold as they were at the very major 2002 market bottom, which should give investors a great deal of heart in order to hold on just a little bit longer. While the action of the last few weeks has been at times inconceivable, the degree of technical compression in these markets is at levels rarely seen, implying a coil spring. Once the tension unwinds, it will unwind very rapidly, and for the share prices, that should imply a strong recovery dead ahead. Of course, AIG remains a major wild card as at least in my view, the only outcome which could really serve to depress these stocks further would be a 1929 style stock market crash with margin selling, the works. Absent that, the recovery bounce should be well worth holding for and to this point, critical support levels have held.
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