By Lawrence G. McMillan, MarketWatch
AFP via Getty Images
The stock market staged a pretty strong oversold rally from March 23 through March 31. In the first three days of that rally, the advance was over 20%, and it was the strongest 3-day rally since… 1931. 1931 was one of the worst years of the 1929-1933 bear market, so these oversold rallies occur within bear markets and are not unusual. In fact, in the 1929-1933 bear market, there were seven rallies of more than 20%
Oversold rallies typically reach the declining 20-day moving average, overshoot it some, and then fail. The current rally just barely touched the declining 20-day MA before failing. I would have thought it had a little more room to the upside — to 2730 in the S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.20% , say — but it did not. Now, there is resistance at 2650, where that rally topped out.