Barry Ritholtz, at the Big Picture, is finding many reasons to believe that chart patterns are revealing that the indexes are close to a bottom in the bottoming process.
10 Bullish Charts, Signals, Indicators
Excerpt: "Earlier this week, we discussed several anecdotal pieces of evidence that suggested we were closer to the bottom then the top.
Today, we look at specific data and charts that can provide some insight as to how extreme these present levels are. All these suggest to us that we are increasingly close to a bottom that can be purchased for an upside trade of 20-30% from these levels.
NOTE: We scale in over time, in 10% increments, and recognize that the bottoming process can take several months to several quarters to complete. Hence, slowly buying in is the key.
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1. Relative Strength Indicator, SPX, 1928-2008
Ever since the beginning of the S&P500, the RSI’s monthly indicator has only dropped below 30 on four occasions: 1929, 1973, 2002, and 2008.
All 3 prior instances were very close to lows.
2. SPX Losses
The S&P has given up nearly the entire gain from the 2002-03 period to the October ’07 highs…
3. Dow Components and the 200 Day Moving Average
All 30 Dow stocks are below their 200 day moving average — a condition that has only occurred once before — and the last time was right after the 1987 crash…
4. Cash Allocation
Investors current allocation to Cash is well above its 21 year mean and are at the highest levels since ’02, ’98 and ’90 lows…
5. 90/10 days
This week has seen three 90% downside days, reflecting massive liquidations.They can only continue for so long…
6. Percentage NYSE over 200 Day MA
The percentage of stocks trading over their 200 day moving average is at multi year lows:
Yet another historically excellent entry point…
8. VIX Moving Average
The VIX (also known as the Fear Index) hit a multi-year high of 70.90, reflecting extreme levels of emotion in the markets. We like to look at this on a 50 day moving average…"
Click here for full article.
is 2002, the second chart is current as of 10/10/08
