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Standard & Poor's Short-Range Oscillator (Oscillator) is a market measure tool that seeks to determine whether the U.S. domestic equity market has been oversold or overbought.
The Oscillator takes a number of related variable of trading data into account, tracks development according to several moving averages, which results in an average numeric value that is either positive or negative. Historically, the expression of this result has been viewed as symbolic of the condition of the market.
An Oscillator value of 50 percent is considered par. When the Oscillator reaches a value of +4 percent meaning 4 percent above par, or 54 percent, the market is technically said to be in an overbought position. Markets in this standing are likely poised for a downward correction.
By contrast, Oscillator values reaching -4 percent, meaning 4 percent below par, or 46 percent, the market is considered oversold, which may lead to a rally in the market.
Extreme oversold or overbought market positions, when values reach -8% or +8% respectively, can lead to significant market advances or declines.
The Short Range Oscillator is provided through the Trendline Daily Action Stock Charts publication. Annual subscriptions are available with issues mailed weekly, biweekly or monthly.To learn more about Oscillator, click here.