Thursday, January 17, 2008

The US Stock Market (S&P 500) has Broken Down. Where is Support and Bottom?

Today, January 17, 2008, the US Stock Market as represented by the S&P 500 Index has broken down and broke a long term and important support level of 1363.98. On March 2008, the bottom of 1363.98 held. On August 2008, the bottom of 1370.60 held. Then on Thursday, January 17, 2008, the S&P 500 ($SPX) tested the bottom of 1363.98, and solidly broke below that level, closing at 1333.25. This is not good for the market.

Next Support Levels

Next major support levels are 1327, 1246 and 1219 on the S&P 500 ($SPX).

New Bottom Indicator: Ratio of Stocks Above 200 Day Moving Average to Stocks Above 50 Day Moving Average

Previously, we looked at several stock market bottom indicators such as the stocks above the 50 and 200 day moving average (low percentage means we are close to bottom).

We use this information to come up with another Stock Market Bottom Indicator. We take the ratio of Stocks Above the 200 Day Moving Average to the Stocks Above 50 Day Moving Average. When this ratio spikes above 2, the market is often near or at a bottom. Another way to look at this, is as the Stocks above the 50 Day Moving Average goes down very low in relation to the Stocks above the 200 day Moving Average, the stock market has been oversold and we start to form a bottom.

Currently, the $SPXA200R to $SPXA50R Ratio is at 1.83, and we are getting closer, but we are not there yet.

Other Oversold and Bottom Indicators

  1. Overbought, Oversold, and Oscillators
  2. Stocks Above 50 and 200 Day Moving Average
  3. Put-Call Ratio
  4. New High-Low Index

Current Stock Chart With Information Above

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