Friday, September 19, 2008

Big Ass Reversals

The kind of price action we’ve seen in the S&P over the last two days has been found almost exclusively in one type of place – bottoms.

I looked at any time the market closed up by at least 3% today after being down over 1.5% yesterday. Both days had to have at least a 3.5% range. There was no criteria stating the market had to have suffered a significant selloff – but it always did. I don’t have charts of the 1st 3 instances. The rest I do.

The first was 10/24/62 and it led to a major bottom and an immediate rally. The 2nd was 11/26/63 and the story was pretty much the same there. A big rally ensued. The pattern also appear on September 5, 1974. That was the lone disappointment. The market made two more legs down before bottoming out a month later.

The next 6 instances are all shown below. I’d suggest studying them.



Johan Lindén said...

Most often this time of situation, as also seen in the charts, do a revisit of the bottoming face. So yesterdays close should be tested again. And that's often happens sooner than later.

Eric said...

Ding Ding this the bell ringing to mark the bottom?

Just to add a little to your blog on the NYSE the past few days the number of stocks making new 52 week lows have been above 30% vs total issues traded. Back in 2001/2002 that number only got as high as 20% at the bottoms. This definitely looks like a tradable bottom right here. Looks like we are up 40 points in the S&P futures overnight.


heywally said...

Big Ass - ha! Fortunately, I didn't panic with my longer term holdings these last few days. Unfortunately, I was walking the dog when the news hit yesterday.

I guess we're back in by-the-dip mode though I still don't trust this market on the long side as the players out there seem to be very 'nervous' and unpredictable. Plus, we're still running the money printing machine at full bore.

eh said...

Given the MASSIVE, totally unprecedented govt intervention that is lifting sentiment, I don't see how anything definite can be said by looking at...precedent -- it's not like the market is moving on its own.