On the Verge of Confirming Bottom ~ The Risk Averse Alert

Thursday, March 12, 2009

On the Verge of Confirming Bottom

Obviously, a positive turn of events today. Still, we should refrain from declaring bottom is in. One final turn down is by no means out of the question.

Everywhere can be seen technical measures with a lot of room for further improvement. Some of these stand at points you might call "defining" ... where another day like today would in all probability confirm the market has, indeed, turned the corner. Short of this, however, the risk of one last fade remains.


Case in point is the Volatility Index. If this thing slices through its 200-day moving average with some conviction, then chances are the market's bottom would be confirmed.


Ditto RSI. A further advance lifting the Relative Strength Index into decided buy-side territory (above 50) — an elusive accomplishment over the past nine months — would go a long way toward raising the likelihood bottom is in.

One cautionary note, however, is precipitated by RSI's sharp rise to the area where buy-side and sell-side strength are in balance (i.e. around 50). On one hand, RSI's strong surge higher could be a fitting start to the larger advance I am anticipating. Yet on the other hand I am concerned the long side of the trade could step aside and allow the short side opportunity here to drive the market lower once again.

Probably a useful frame of reference can be seen beginning last May. When the S&P 500 initially turned down from its 200-day moving average, RSI fell inordinately sharply. This proved a fitting start to the decline I had been anticipating. Something similar (in reverse) might have unfolded this week.

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Anonymous said...

The word is elusive - not illusive. Just trying to help.

TC said...

Thank you, Miss Wilson (best English teacher I ever had).

Anonymous said...


I hate to rain on the party but I have a completely different take away from this action.

I believe we are on the verge of a HUGE down move. I think this rally is fake.

Remember, when I said that this reminded me of mid-September? I lied. This is mid-September.

I am positioning big time to profit from this coming move. I think you should consider the same.

Of course, I could be wrong and will definitely pay the price.

Have a good weekend.

TC said...

I will have a good weekend, thanks ... and I will not be worrying about the date. It's March '09, not September '08.

Just got done reading Doug Noland's Credit Bubble Bulletin. I can count on one hand the number of times my outlook was not somehow well-spoken by his. Let me quote something he wrote tonight. I believe his message is harmonious with my forecast:

"I suppose I’ll for now reside in the camp that believes the system is perhaps not today as acutely unstable as many fear. The unfolding Government Finance Bubble is - until it isn't - a major stabilizing force."

The stock market's underlying technicals evaluated in the framework of the Elliott Wave Principle entirely agree.