Let’s take a quick look at some of the indicators that help investors gauge if a market is oversold or overbought. Generally, these are not conditions that we look at for individual stocks, but can be helpful when looking at the complexion for a broad based index.

Often times, markets will overshoot one way or the other. The exact level of the overshoot can be revealed by looking at the put/call ratio, McClellan Oscillator and the AAII sentiment readings.None of these are absolute, just one more piece of the puzzle.

As Tom McClellan told us in the latest TDI Podcast, the simple structure above the zero line is not convincing him that the bulls are entirely in charge at this point.

Investor sentiment is gaining, although not high enough to for a warnings at this point. It is now matching the levels last seen in late April, just before the markets corrected.

The Put/Call ratio is very low and that is usually indicative of overconfidence.