How Do We Nail the Bottom?

Hong Kong down 12.7% overnight. Europe down 2-5% depending on the country. Nikkei is at its lowest point in 27 years.

Guys it's very likely we are getting near the bottom of this thing. You're seeing historic drops in all the world markets now. All guidance is pointing down from all public institutions in all regions. There will come a time (soon I anticipate) where the continuing bad news will cause a shrug of the shoulders by the markets.

That will serve as an ideal entry point.
 
I've attached a current chart of the VIX. Notice it has closed above its 20 day Moving Average now since early September. It has penetrated it several times but cannot finish below the MA.

This again will be a key sign to us when it closes below the 20MA that we have made a notable shift in the characteristic of the market. Combine this with a retest and some upside volume and you likely will have an entry point.
 

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There is such huge support in the 850-870 range in spooz the only direction seems to be higher. TIme 2 buy and hold for the next 15 monhs. Stop being a noob. Go long now.
 
S&P Cash hasn't broken the Oct. 10 low yet, though. While I don't put too much stock into price/time symmetry stuff (usually the realm of hardcore Gann and Fibonacci folks), key highs and lows on Oct. 9 and 10 are quite fascinating. The following is true for S&P cash and I'm 95% sure it holds for Dow cash and futures:

Oct. 10, 2002: 5-year low is set. This is now an 11-year bottom.

Oct. 9, 2007: All-time high is set.

Oct. 10, 2008: 5-year low is set. Another long-term low? We'll have to see.

This sets up a very slightly bullish long-term channel. The 2000 high connects to the slightly higher 2007 high, while the 2002 low connects to the higher low (so far) in 2008.


Quote from netedge:

Ok so here is the critical retest of the low of 10/10. Unlike Friday we actually BROKE the low of 10/10 on the ES (emini S&P) of 837 at 3am and dropped all the way down to 825 on the low this morning. Now we have penetrated the low and are experiencing a bounce as anticipated from there.

The key today is do we hold the bounce or do we once again penetrate the low - this time 825 and continue down to the last bear market low of 768 from here? I think what happens today tells us a lot about what we need to know for the next few weeks in this market. Stay tuned....
More...
 
The downtrend resumes for SP500, but not for Dow yet. Dow is the only index for which the downtrend-over sign is still valid after today's close.
 
Ok, so this afternoon we finally resolved the test of the bottom of October 10th. And we all know how it was resolved. It HELD FIRMLY after a wild ride today. The shorts started covering and the longs began to feel more comfortable and began entering.

Volume on today's rally was impressive. Markets up almost 9%. Two of my 3 bottoming conditions have been met - when the market rallies on bad news this is the 1st part of the signal (see below). The other is a VIX steadying under 50. And the last is a retest and hold above the October 10th low (mission accomplished).

Here's evidence of part 1 in the news today:

Stocks see moderate rebound after sharp selloff
Tuesday October 28, 12:33 pm ET
By Tim Paradis, AP Business Writer
Stocks rebound but come off highs as weak consumer confidence reading stirs spending worries


NEW YORK (AP) -- Wall Street took a dose of bad economic news with relative calm Tuesday, rallying even as consumer confidence plunged to its lowest levels in 41 years. The Dow Jones industrial average rose 150 points, leading the major indexes with a gain of more than 1 percent.

The market did pull off its highs after the Conference Board said its index of consumer confidence has fallen to 38 in October, well below the 51 analysts expected. Wall Street is worried that consumers, whose spending drives more than two-thirds of economic growth, will keep pulling back, particularly as the holiday shopping season approaches -- but with a litany of bad economic news this month, many investors expected the index to sag.

Are you feeling better now :D
 
You may enjoy the work of Paul Desmond (Lowry Research). He has done a lot of quantitative studies of market bottoms:

http://bigpicture.typepad.com/comments/2006/02/qa_paul_desmond.html

http://www.thestreet.com/markets/marketfeatures/10269355.html


Quote from netedge:

Ok, so this afternoon we finally resolved the test of the bottom of October 10th. And we all know how it was resolved. It HELD FIRMLY after a wild ride today. The shorts started covering and the longs began to feel more comfortable and began entering.

Volume on today's rally was impressive. Markets up almost 9%. Two of my 3 bottoming conditions have been met - when the market rallies on bad news this is the 1st part of the signal (see below). The other is a VIX steadying under 50. And the last is a retest and hold above the October 10th low (mission accomplished).

Here's evidence of part 1 in the news today:

Stocks see moderate rebound after sharp selloff
Tuesday October 28, 12:33 pm ET
By Tim Paradis, AP Business Writer
Stocks rebound but come off highs as weak consumer confidence reading stirs spending worries


NEW YORK (AP) -- Wall Street took a dose of bad economic news with relative calm Tuesday, rallying even as consumer confidence plunged to its lowest levels in 41 years. The Dow Jones industrial average rose 150 points, leading the major indexes with a gain of more than 1 percent.

The market did pull off its highs after the Conference Board said its index of consumer confidence has fallen to 38 in October, well below the 51 analysts expected. Wall Street is worried that consumers, whose spending drives more than two-thirds of economic growth, will keep pulling back, particularly as the holiday shopping season approaches -- but with a litany of bad economic news this month, many investors expected the index to sag.

Are you feeling better now :D
More...
 
Assuming we have arrived at a (interim?) market bottom the next key step is to begin identifying which of the sectors will take a leadership position in the rebound. Many feel it will be the tech sector.

This will be part of my upcoming research. The other question is - since the foreign markets have been hit worse than the US - will they rebound even more than the US market in a potential rebound?
 
Are you all talking a bottom for years or a bottom for months? I have a hard time taking the "for years" view, but I guess it really doesn't matter, just don't let your grip on whatever you buy get too tight and remain nimble.
 
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