Price & Sentiment Dislocate: 3 Rare Buy Signals Emerge

Be Greedy When Others are Fearful

Every major stock market bottom has been marked by extremes. Volatility hits a fever pitch, sentiment sours to extreme fear among investors, and market breadth (participation) becomes feeble. Most recently, major volatility spikes and end-of-world sentiment marked the lows of the ‘Liberation Day’ and COVID-19-induced bear markets. However, in rare instances, extreme readings in technical and market indicators can occur during “garden variety corrections”, where the S&P 500 Index and the other major indices are still within shouting distance of all-time highs. Currently, this is exactly what is occurring in the stock market. Although the S&P 500 Index and Nasdaq are each within 6% of all-time highs, investors are extremely fearful. Below are 3 extreme market readings that signal a bottom is nearby.

The McClellan Oscillator is Extremely Oversold

Market breadth, or participation, is one way to gauge how extreme market selling is. When the number of advancers reaches a very low level, it can signal to savvy investors that panic selling is underway, and sellers are likely to be exhausted soon. The McClellan Oscillator measures the Net Advances (Advances-Declines) on the New York Stock Exchange (NYSE) or S&P 500 (SPX). According to data from X user Subu Trade (@SubuTrade), “despite being within 5% of an all-time high, the SPX McClellan Oscillator is extremely oversold.” “This setup has occurred 10 times previously, and SPX was higher every single time one month later with an average gain of 3.2%.”

Image Source: @subutrade

Meanwhile, yesterday, the NYSE McClellan Oscillator reached its lowest level since the ‘Liberation Day’ market bottom in April 2025.

Image Source: StockCharts.com

Fear/Greed Index Hits “Extreme Fear

The CNN “Fear & Greed” Index combines seven different indicators to monitor stock market behavior. The index uses market momentum, stock price strength, stock price breadth, put and call options, junk bond demand, market volatility, and safe haven demand to “gauge the mood of the market.” Despite the subdued correction in equities, the CNN Fear/Greed Index registered its first “Extreme Fear” reading in 2026.

Image Source: CNN

Active Investor Exposure is At Lowest Levels Since Mid-2025

The National Association of Active Investment Managers (NAAIM) is a survey that represents the average exposure to U.S. Equity markets as reported by its members. NAAIM exposure printed its lowest level since May 2025.

Image Source: NAAIM

What to Buy?

The indicators described in this article suggest that the market is ready to continue its bullish phase. Investors should buy the stocks that have held up the best during the market downturn. One group with stellar fundamentals and technical action to watch is the AI infrastructure stocks, which include names like Nebius (NBIS), IREN (IREN), Sandisk (SNDK), Micron (MU), and Bloom Energy (BE).

Bottom Line

Market history proves that the most rewarding entries occur when the technical “rubber band” is stretched to its limit and the crowd is bracing for a crash that hasn’t arrived. With breadth and sentiment indicators at extremes, now is the time for investors to pay attention.

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This article originally published on Zacks Investment Research (zacks.com).

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