The market hit severely oversold levels last week: Last week, the S&P 500 traded 3 standard deviations below its 50-day moving average, the most since the start of the 2022 bear market. This is also the second-largest divergence since the 2020 pandemic. On Friday, after rallying 2.1%, the index closed ~5.5% below its 50-day moving average. Furthermore, the S&P 500 has traded below its 200-day moving average for 5 straight days, the longest streak since October 2023. In the past, such an extreme divergence has not lasted long, and the market has seen at least a short-term recovery. Is the market setting up for a bounce?