With the market bouncing like a yo-yo, I thought it might be interesting to check on a few individual stocks and then delve into reader questions. I have a couple of interesting morsels on FuelCell Energy, Inc (FCEL) and American International Group, Inc. (AIG). Lets start with FCEL...

I last featured a chart of FuelCell Energy at the end of August where I discussed a possible bright spot for the stock. Turns out I was wrong.

I said that the overhead resistance near 8.50 was the go/no-go line that needed to be passed to convince the shorts that buyers were fully committed to this stock. The shares were not able to retake that zone and then broke support. Today they are down 20% and hitting a new annual low. The stock is now pushing into a short-term oversold condition but there is a good deal of overhead supply that will have to now be worked through.

Chart Courtesy of Thomson Financial

If the market has you down, it could be worse. After all, you could be in the PR department at American International Group, Inc. (AIG) and trying to deal with this [courtesy of my colleague Mark Fightmaster] post on The Smoking Gun's website - After government rescue, insurance firm AIG partied at swank resort.

It does look like the company has tried to clarify the situation but given the public outrage about the current woes, I think this is going to be a hard battle.

My interest in showing the chart is purely for education as it illustrates a point I have discussed on the Relative Strength Index (RSI). Here is the chart...

Chart Courtesy of Thomson Financial

AIG shares pushed to oversold readings during their mid-September plunge into single digit territory. When a stock pushes into a short-term oversold condition I usually look for one of two ways for that to be resolve. The first, and most obvious, is a rally. That is not really what we have here. On a percentage basis there have been some sizeable moves if you time the exact lows in highs. However, we haven't seen what I believe many would call a sustained bounce. Instead we see the stock working the oversold condition off via a consolidation, which is the second situation. I tend to view that as more of a continuation pattern. Of course, in this case, the downside for AIG is limited as the stock can't break below zero.

This leads to a question from Mike...

"Hey, Nick--Thanks for all the excellent coverage. One question's been bugging me. On my charts of the Dow, the RSI is now just barely into the 30 range--noticeably higher than in the July sell-off. With the A/D and NH/NL figures at extremes, can you explain why we are not more oversold? There is NO ONE buying from what I hear. (I'd hate to think we can get more oversold than this!) Also, for benefit of less experienced/educated readers, in the case of a major index, what exactly is the RSI 'relative' to? Any insights would be most appreciated if you have the time. Thanks, and remember to keep all charts and screens away from any open windows!"

In other words, it is a simple math calculation. The current price action of the Dow Jones Industrial Average would require a more severe drop than we have seen to push into more severe oversold readings.

And since we are hitting reader questions, I want to end this post with a great question from Rod who writes -

"Hello Nick, Yes there is an intense battle now being fought between the bulls and the bears; however, to what extent is this a battle of machines rather than human minds? Presumably, there are always human traders in charge of the switches -- right? Seriously, I have been thinking about the neural networks and artificial intelligence that may be in charge of the market rather than guys like you and me (definitely, anyhow, above my pay grade) who are supposedly matching wits and creating this market, which in theory encompasses all the knowledge in the world necessary to accurately assess price. What do you think, Nick, are humans still in control or are the machines now ascendant? Has software taken over and the huge baskets of stocks changing hands and the transactions based primarily on computer code?"

I think Rod raises an interesting question, and I don't have the answer. I do know that program trading has a strong foothold and this allows for unique situations. What I wonder is how much of the human element is transferred in. In other words, the market trades on emotion and I wonder if the programs amplify this by allowing more trades to go over quicker. I am not suggesting that the programs have emotions but that they were set up by people who make discussions based on emotion.

Put another way, this blog would have a completely different feel if the keyboard was wired straight to my brain and it posted everything I thought. The process of having to type it out and review it limits the volume. And knowing what goes through my head, that is a good thing for everyone...