Sector Investing

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An argument for a bottom being in would be based upon anything but expectations for fundamental improvement in the foreseeable future.

Instead we would have to look at sentiment. What do we see at stock market bottoms?

Extremely bearish sentiment.

Yes, we have had that for weeks. Six straight weeks of more bears than bulls in the Investors Intelligence Poll.

http://www.schaeffersresearch.com/streetools/market_tools/investors_intelligence.aspx

Look at the put to call ratio and you will see it is the most bearish it has ever been for a sustained period of time. That means nothing though until it begins a sustained move lower:



But if you look at a shorter term chart you will see it is showing signs of topping and turning lower. That corresponds with long term bottom formation:



We also see improvements in market breadth that were beginning to take place even as the market formed lower lows three weeks ago:

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=66169487

But most telling to me is the fact that on most important charts we will more than likely see not only the higher volume up day, and week but soon month as well on the major market charts.

Daily Chart:



Weekly Chart



Monthly Chart



Volume is very telling. What it is telling me right now is that the market is not at all convinced that whatever kind of recession we might be entering will have anything other than a soft landing.

That said what if we have a 2001 type situation? Volume in early 2001 was suggesting things were not going to get much worse then too. We know now how wrong that actually turned out to be. Check out the monthly chart above where for two months in early 2001 it looked like the market was going to rebound.

More on that in the next post.

RtS