Sunday, January 20, 2008

Time for a US Stock Market Bounce on the S&P 500?

The US stock market has been going down for a while and the stock market has broken down below previous strong support of 1363. Is it time for a bounce on the S&P 500?

The S&P 500 may be oversold right now, and the S&P 500 seems to have bounced at the new support level of 1326.

According to different stock market bottom indicators, the S&P 500 may be oversold right now.

  1. Ratio of S&P 500 Stocks Above 200 Day Moving Average to Stocks Above 50 Moving Average: 2.21. [Start looking for bottom after this number spikes above 2.0]
  2. S&P 500 Stocks Above 200 Day Moving Average: 19.04% [Start looking as percentage goes below 40%]
  3. S&P 500 Stocks Above 50 Day Moving Average: 8.62% [Start looking as percentage goes below 20%]
  4. 10 Day Moving Average of Put-Call Ratio: 1.17. [Start looking as number goes above 1.1]
  5. S&P 500 High-Low Index: 0.95%. [Start looking as number spikes below 10%]


All signs seem to indicate an S&P 500 Bounce may be coming soon (possibly after some sort of gap down, high volume down day, then a massive rally, for a capitulation bottom).

However, the bounce doesn't necessarily mean that we are forming the intermediate term bottom. We may retrace our recent downturn, back up to 1411 (38.2% Fibonacci Retracement) to 1443 (50% Fibonacci Retracement).



We may eventually re-test the S&P 500 lows, and possibly breakdown even more.

1 comment:

Hector Rivera said...

First time reader, nice blog and i had reached at the same conclusions.Will be visiting daily now on