Wednesday, April 16, 2008

Have We Put in a Stock Market Bottom?

Above is a daily chart of the S&P 500 Index (SPY) with the number of NYSE, ASE, and NASDAQ stocks making new 65-day lows printed below the relevant bars and the number making fresh 65-day highs printed above. You can see the pattern of dwindling new lows and, recently, expanding new highs. After pulling back and holding support, the market is in rally mode today. An expansion of new 65-day highs above the 480 level registered on 4/7 would confirm that we have, indeed, put in an intermediate-term bottom in stocks. A return to the trading range of the past several days would obviously invalidate today's breakout move.