« Economic clock: what time is it? | Home | What’s not to like about FMC Strategic Value Fund? »
Stock market bottom? Not yet.
By Rob | August 6, 2008
Yesterday was the first 90% day we have seen June 26th. On the NYSE, there were 2526 advances and 862 declines. That means up volume was 91.4%. Bottoms are usually accompanied by a series of 90% up and down days. The absence of 90% Days is very unusual, especially given the Uptick Rule has not been in place. Since this was the first 90% day in 2 months, that makes it noteworthy.Back on July 15, the Dow made a closing low of 10962.54 — the lowest Dow close since July 2006. Yesterday, it closed at 11,615.77. So we have yet to run even 1,000 points. Hence, despite the turmoil, this is still early in the rally’s lifespan.
We have Lowry’s Selling Pressure Index at those highs. Normally, it declines well ahead of a market bottom. The new high in this Index does not equate with the thesis that we’re near a market bottom. Since we did not have any 90% Down Days close to the mid-July low, we have not seen the required selling exhaustion for a major bottom. Its been 3 weeks since the lows, and we did not have a 90% Upside Day quickly after the rally began. Some of the best market timers I know view the recent rallies as primarily short-covering by hedge funds rather than accumulation from investors. Bottom line: A classic Bear Market rally, one that could run for a few more weeks. My best guess is to 12,250 - 12,500.
====================================
This below is from Mike Belkin, strategist at Merrill Lynch
“Most global stock indexes have decisively broken below their 200 week moving averages, which is a major trend reversal. The intermediate term (3 month) and long term (12 month) model forecasts point down. We recommend taking advantage of every minor rally to close long positions, go short and shift out of tech and cyclicals into defensive groups. Stock indexes haven’t yet had the big surge in volatility (5% daily NASDAQ moves down and up amidst a declining market). That is probably approaching. Bear market trading is typically more productive selling into those big percentage bounces, rather than selling into big declines and then watching the market bounce back in your face.
Potential downside targets after a 200 week average breakdown are 1) the 200 month average and 2) The previous 2002-2003 lows. Those levels are 25%-47% below current levels for most stock indexes. U.S. financial indexes are already there (BKX, XLF). So don’t think it can’t happen for the broader market and other currently elevated indexes, stocks and groups.”
Michael Belkin
The Belkin Report
July 6, 2008
If you enjoyed this post, make sure you subscribe to my RSS feed!
Topics: Uncategorized |