09 October 2008

Big Bottom

Recent market action has forced me to resort to the Tap, for a double-shot of Big Bottom.

I am just helping the market find a bottom, in my own small way. Posting these videos seems to be as effective as Congressional bailout packages and coordinated global rate cuts.

Bespoke Investment Group shared the following data and analysis, suggesting that the market is rarely this far off its moving average:

Earlier today, the S&P 500 was trading 26% below its 200-day moving average. As shown in the historical 200-day moving average spread chart below, this has been an extremely rare occurrence in the S&P 500's history. The index got below 25% in July 2002, September 1974, May 1940, and multiple times in the late 1920s and the 1930s (not even the '87 crash saw the spread this low). As the chart highlights, spreads don't stay down at these levels for long, which means that while we might not go straight up from here, the sharp declines that we have been seeing are due to take a breather for at least a little bit.

Adam Warner kindly covered all the bottom-calling bases today:

The VIX has hit repeated new "all-time" highs since last week, 59 is now something like 20% above the "old" ones. And the market continues to struggle.

There is a growing realization everywhere else however that there is no magic number here.

I pick on useless VIX analysis on my teevee because I am an options site, but let's face it, there are mountains of indicators demonstrating we are beyond beyond beyond extreme oversold. There are fewer NYSE stocks above their 50 Day MA than any time since 1987. Not sure the symbol of that on sharpcharts, but the chart here shows that same measure for the S&P. We're also 25% below the 200 MA in the SPX, something that also goes back to 1987.

So serial bottom callers. If you still have money left, time to load the boat!

Here's my rundown of today's oversold, overdone data that points to a big bottom, one we should soon leave behind:

The S&P500 closed at 984.86. Its intra-day low was 970.97.
The 50-day moving average is 1228.62; the 200-day moving average is 1320.66.
The close is 19.8% below the 50DMA and 21.0% below the 200DMA.
The intra-day low is 25.4% below the 50DMA and 26.5% below the 200DMA.

The VIX hit 59.06, closing at 57.53.

The number of S&P 500 stocks trading above their 50-day moving average ($SPXA50) is six.
Yes, that's a mere 1.2% of S&P 500 stocks.

The number of NASDAQ-100 stocks trading above their 50-day moving average ($NDXA50) is one, the loneliest number.

The number of Dow components trading above their 50-day moving average ($DOWA50) is zero. Again. If it could go below zero, or imaginary, it looks as if it would.

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