The market is oversold, but we do not need an indicator to figure that one out. There is one HUGE problem with oversold conditions right now. Yep, you guessed it. We are in a bear market. Oversold conditions alert us to possible setups in bull market environments, but not in bear market environments.

Stocks are in a freefall with small-caps leading the way lower. The Russell 2000 ETF is down some 25% over the last three weeks, while the S&P 500 SPDR is down over 18%. This is set to worsen

Defensive ETFs led the rebound the first three days of the week and held up the best on Thursday and Friday. Utilities, bonds, gold, Healthcare, REITs and Consumer Staples finished the week with strong gains.

Stocks were extremely oversold last Friday and ripped higher the first three days of the week. The S&P 500 gained some 6% and retraced around 50% of the prior decline. And that was it. The bear market environment, which

The bond and gold related ETFs continue to lead the pack as money moves out of stocks. A handful of stock-related ETFs held up in late February with normal retracements and some even sport shallow retracements.

This is just an update to the mean-reversion setup currently in play for the S&P 500 (and SPY). I will also post the regular ETF report later today, probably around 10AM ET. The mean-reversion setups were explained in detail last Friday, Saturday and Sunday

The stock market is either in corrective mode or bear market mode, which means risk remains well above average for all positions. Long or short. The S&P 500 became extremely oversold after a 12% decline last week.

After falling some 12% in six days and RSI moving below 20, the trading world is looking for a mean-reversion bounce. The short video below will look at two mean-reversion systems trading SPY at oversold extremes.

Only three of the sixty ETFs in the core list advanced this week: AGG, TLT and LQD (bonds). Everything else declined, but the biotech ETFs (IBB and XBI) declined the least of the common stock ETFs. The banking and insurance ETFs (KRE, KBE, KIE) led the way lower with the banking ETFs hitting 52-week lows.

There are Black Swan events and then there are BLACK SWAN events. The current decline, 12% in six days, ranks as one of the sharpest on record. Not counting 1929, the sharpest decline on record is the crash in October 1987, when the S&P 500 fell some 28% in 4 days.

Stocks were broad-sided as the stock market fell sharply. Even though the S&P 500 SPDR remains in the falling knife category and has yet to bounce, I am on the look out for ETFs that hold up relatively well during this onslaught. There are several ways to separate ETFs with relatively strong charts and those with relatively weak charts.

As technical analysts and chartists, we study historical prices and patterns to get an idea of what to expect going forward. No two patterns are exactly the same, but they often rhyme with a few common characteristics.

This weekend’s list is heavy on Healthcare, which is not surprises because the Healthcare SPDR, Biotech ETF and Medical Devices ETF held up well this week. In addition, all three ETFs have short-term bullish continuation patterns.

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There are plenty of cautionary tales to go around, and yet the new high parade continued this week. This is why process, price action and signals are so important. I can find plenty of reasons for caution and these were highlighted over the last few weeks.