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Saturday, July 12, 2008 2:07:03 PM
Amateur Investors Weekend Stock Market Analysis (7/12/08)
http://www.amateur-investor.net/Weekend_Market_Analysis_July_12_08.htm
The market is acting much like the period from 2000-2002 which was a very bearish period for the market. Although fear picked up some this week especially on Friday it still hasn't reached a level as of yet to signal a bottom even though the S&P 500 has closed lower 7 out of the past 8 weeks. Looking at the Volatility Index (VIX) the last four significant oversold rallies (points A to B) occurred as the VIX rose above the 30 level (points C). The VIX is getting close to the 30 level but so far hasn't risen above it.
Another thing that does indicate a bottom could be approaching is the fact that the NYSE Composite closed just over 1000 points below its 200 Day Moving Average (MA) on Friday. This is a rare event and since 2001 each time the NYSE has closed 1000 points or more below its 200 Day MA (points D) a significant oversold bounce has developed within 5 trading days (points E to F). Thus the odds would favor a possible bottom occurring sometime next week if past history repeats itself.
Meanwhile the % difference between the Bullish and Bearish Investment Advisors is now -20% which is an extreme level. Since the mid 1990's each time the % difference has dropped below -10% (points G) this has been followed by an oversold rally (points H to I) within 1 to 3 weeks.
As far as the major averages the Dow has failed to hold support at its longer term 38.2% Retracement Level (calculated from the October 2002 low to the October 2007 high). The Dow's next major support area appears to be at its 50% Retracement Level near 10700 (point J) so if it drops back to this level next week then we could see a potential bottom occur at this level.
http://www.amateur-investor.net/Weekend_Market_Analysis_July_12_08.htm
The market is acting much like the period from 2000-2002 which was a very bearish period for the market. Although fear picked up some this week especially on Friday it still hasn't reached a level as of yet to signal a bottom even though the S&P 500 has closed lower 7 out of the past 8 weeks. Looking at the Volatility Index (VIX) the last four significant oversold rallies (points A to B) occurred as the VIX rose above the 30 level (points C). The VIX is getting close to the 30 level but so far hasn't risen above it.
Another thing that does indicate a bottom could be approaching is the fact that the NYSE Composite closed just over 1000 points below its 200 Day Moving Average (MA) on Friday. This is a rare event and since 2001 each time the NYSE has closed 1000 points or more below its 200 Day MA (points D) a significant oversold bounce has developed within 5 trading days (points E to F). Thus the odds would favor a possible bottom occurring sometime next week if past history repeats itself.
Meanwhile the % difference between the Bullish and Bearish Investment Advisors is now -20% which is an extreme level. Since the mid 1990's each time the % difference has dropped below -10% (points G) this has been followed by an oversold rally (points H to I) within 1 to 3 weeks.
As far as the major averages the Dow has failed to hold support at its longer term 38.2% Retracement Level (calculated from the October 2002 low to the October 2007 high). The Dow's next major support area appears to be at its 50% Retracement Level near 10700 (point J) so if it drops back to this level next week then we could see a potential bottom occur at this level.
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