SPX Daily Chart from August 2011 Shows the Waterfall Crash from Oversold Levels

This is an interesting chart to keep in mind moving forward. The U.S. debt was downgraded late July/early August 2011.  The SPX was teetering at the 200-day MA and collapsed through, coinciding with the debt downgrade as well as large solar flares that marked the start of the crash on 8/2/11. The red circles show how market crashes more often than not occur from oversold levels. So be cautious with automatically assuming that oversold levels means a bounce is coming, typically it does, but in special markets the rule book is tossed out. The green lines show the positive divergence as October 2011 began, which was the go long signal.

Currently, the SPX remains well above the 200-day MA and equities remain buoyant off the Fed's easy money. The markets are not in danger of a severe flush downwards until you see Keystone's SPX:VIX Ratio Indicator drop under 68. The point of the chart above is that markets crash from oversold levels so simply be aware of this as the weeks play out. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.