Picturing The Bottoming Process ~ The Risk Averse Alert

Thursday, October 30, 2008

Picturing The Bottoming Process

Some fuller visualization of how things might unfold over the weeks/months ahead as the stock market goes through its bottoming process is on tap tonight ... hoping to maintain perspective and establish reasonable expectations.


The six months isolated above might reasonably reflect the qualities of action set to unfold before the most rip-screaming rally in five years gets under way.

As you can see, MACD has just begun to turn higher... This is one of several "first signs" the stock market's bottoming process is, indeed, under way.

Now, before bottom is in we might see MACD first rise to a slightly positive level ... exceed August's peak ... then once again turn lower and finish well-above its present depths as indexes simultaneously retest current lows. (MACD rising to a positive reading is not a prerequisite to bottom. Yet a divergence such as occurred at the March bottom should be rather expected.)


More "first signs" to a bottom. Indeed, the Bullish Percent Index clearly has made the turn. The same can be said for the NYSE McClellan Oscillator. So, the case for an upcoming period of relative buoyancy is gaining technical substantiation.

NYSE 5-min

Another lower volatility treat today. In tonight's Fast Money clip Pete Najarian talks about volatility coming in. Since this is a "keeping things in perspective" post, you might want to consider how "volatility coming in" is a relative matter. Judging by the VIX, you might be hard-pressed to conclude volatility is "coming in." True, I recently have argued much the same as Najarian. Yet as you can see, the NYSE Composite appears vulnerable to another let down, a la last Wednesday, 10.22.08 (not that this has to happen tomorrow). In other words, daily moves of 5% or more (in both directions) remain on the radar...

Here's a couple other relevant thoughts of mine made in comments at other blogs...

Bears Have Rallies Too

Enough Panic. Let's Make Some Money!

Fast Money
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