Determining long term market tops and bottoms for the SOX:
Cross Overs of the 50 day sma on the SOX along with the number of stocks above the 200 and 50 day sma's of the NASDAQ which are overbought above the top (red) horizontal line and oversold below the lower (green) horizontal line. The horizontal line placement was picked by me somewhat arbitrarily but the point being made is a simple bit of contrarian logic; when too many stocks are above the 200 and 50 day sma's a reversal is in order. By watching for the cross overs in the 50 day sma above or below the longer term 200 day sma we can predict long term moves in the SOX higher or lower as well which may not correct until extremes are reached as shown by the horizontal lines on all the many charts below:
BPNDX and VXO vs the SOX. Sell zones are seen above or below the red lines depending on the chart. The VXO is a volatility index based on the S&P 100. It moves opposite to the SOX and is most useful at extreme reading to help denote enough "fear" in the market for a long term bottom to form. The BPNDX is based on the number of NASDAQ 100 stocks that have generated or lost PnF buy signals. Look for trend reversals to develop over time. It's not the absolute high or low that is important but rather the development of positive or negative divergences. For instance in October 2002 the BPNDX developed a positive divergence by setting a higher low even as the SOX was setting a lower low.
Market breadth indicators. Sell zones are seen above, or below, the red lines depending on the chart. Long term buy zones are shown above, or below, the green horizontal lines depending on the chart.
Wow, nice charts, RTS. Assuming the rest of the indices also mimic the 3-black crow patterns in the RUT, SOX, NYA, TRAN, and XAX, we arrive at the following target lows (after a re-trace up off a spike low tomorrow):
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