The OB/OS indicator shows when the stock market is overbought (and a correction is due) and
when it is oversold (and a rally is due).
Readings above +200 are generally considered bearish and readings below -200 are
generally considered bullish. When the OB/OS indicator falls below +200 a sell signal is
generated. Similarly, a buy signal is generated when the OB/OS indicator rises above
-200.
As with all OB/OS-type indicators, extreme readings may be a sign of a change in
investor expectations and may not be followed by the expected correction. (Refer to the
discussion on the Advance/Decline Ratio, and the
McClellan Oscillator, for additional comments on extremely
overbought/oversold conditions.)
