An oversold market is characterized by massive selling of futures contracts and by a sharp decline in prices during a short period of time, generally as a consequence of market overreaction or panic selling among investors. This occurrence can be interpreted as a sign that the price of the asset is undervalued and may represent a good buying opportunity for investors. The price drop is expected to be followed by a rally.
An oversold market is a bullish signal. This is a technical concept not related to the fundamentals of supply and demand.