Before we examine the Broker-Dealer Index chart to see what the financial sector is doing, let’s take a look at the DIA ETF chart, which is another proxy for the general stock market.
Earlier this week, the DIA ETF moved lower, and the RSI based on it moved below 30 - almost to the 26 level. Since the beginning of 2008, there have been exactly 7 cases when we saw something similar. In 4 of them, this meant that an important bottom had just been formed. In the remaining 3 cases, a major bottom was formed in a short time anyway.
The short-term implications are bullish and the medium-term ones are very bullish.