Short term overbought conditions are likely to be relieved over the coming days and futures would look to confirm this. In terms of the long term prospects for the market much will ride on the recent 'buy' triggers in the Bullish Percents. If these can be maintained while the market retreats then the foundations for a bottom of consequence will be complete.

The indices have reached an important junction with respect to August resistance; two choices are available: a move to the 50-day MA, or a retest of recent lows. Today's Fed decision marks the signpost for the route to take. I have used the S&P as a case in point, but other indices are in a similar position:

Out-of-action for today. Things should be back to normal for Wednesday

Did last week produce a bottom in the markets? What had the Stockcharters to say about it? Joe summed it up nicely with the rate cut and better than expected earnings from Microsoft. The PowerShares QQQ Trust is in a deep band of support around $42: His Dow chart is interesting as it shows a positive test of 1999 highs: He also shows support busted in the S&P The bearish sequence in the Russell 2000 is clear from the iShares, IWM: Fans on the financial ETF, XLF, should keep an eye on Ted 's support lines: The semiconductor index has three price levels to watch: 368 resistance, 352 support, and 333 support. The point-n-figure Semiconductor index chart is interesting as it relates to what I said about this index and 364. Friday's breakout has a new upside target of 436 - negating the prior breakdown target of 260. The more dynamic ATR point-n-figure chart for the Dow has an upside target of 14,114. Sounds a little ambitious given what has gone before: Maurice Walker had ...

After dropping into the abyss, the S&P bullish percent is showing some signs of life. Whipsaws are not uncommon for this market internal, but at these levels I would be surprised to see Thursday's signal as such. There is still a little work to do for the Dow bullish percent: With the Nasdaq bullish percent likely to trigger 'long' on Friday: If I was to make a big guess as to what may follow over the next couple of months I would look for something like this :

The last two days have seen tweezer bottoms in large cap indices, a bullish piercing pattern in the Nasdaq 100 , and a (somewhat) bullish engulfing pattern in the Nasdaq . But my favorite, the semicondutor index , refused to buckle in the face of broad market selling over the last week - although it would be hard pushed to shed more than it has already. Wednesday's bullish hammer is the icing on the cake. Watch for a fresh MACD trigger 'buy' (but well below the bullish zero line, a weak signal) as other technicals improve: The Semiconductor index has a Point-n-Figure chart target of 260 (which would amount to a 50%+ decline from its 2007 highs!). To negate this target the index would need to muster an upside breakout, with 364 likely to define such a threshold. The technology sector is one of the first to push higher from a recessionary environment. Chips should lead other technology based sectors. For the purpose of disclosure I am long some deep-in-the-money calls on the...

Yesterday's lows mark the battle line for Bulls/Bears. The Nasdaq opened around its Tuesday low, but the gap down will probably suck things upwards until the momentum fades and the lows are revisited. TraderMike made a good point about Tuesday's relatively lackluster volume (for a capitulation). If the lows are breached it could get ugly:

The stage is set for the capitulation: [1] Futures are horrendous [2] The VIX is ready to spike from its consolidation [3] Volume will no doubt be huge Grimace

Recycling repayments from loans back into the system. This way, membership subscriptions will continue to support new business opportunities long after the initial $25 contribution. If you would like to help, please subscribe to my newsletter and your first month payment (after the 30-day free trial has expired) will be routed to a KIVA project of your choice. The three new loans are as follows: [1] Nansana 7/8 2037 (C) Group : Betty is a widow with five children. She sells fresh food in the market. She wants to pay school fees for the children and buy food with the business profits. [2] Leonarda Laura Sulca's Group : Leonarda, Petronila, and Ana Maria have been members of the community bank Arco Iris for 6, 3, and 5 years respectively. In their community bank they have learned to be punctual and responsible, to save, to run their business, to avoid getting sick, and to respect other people. Leonarda is 36 years old. She is married and has three children, who are 13, 10, and 8. Sh...

The selling didn't take a break - how much more is there left in the tank? This is what the Stockcharters had to say about it? Joe Reed has called an official Bear Market for the Nikkei, will US markets follow? His additional comments: THE POSITIVE: ***The Word of the day (and possibly for the year) is 'UNCERTAINTY'. But believe it or not there are TWO POSITIVES to keep in mind... *The Republicans do not want a RECESSION before the Election and they will do everything in their power to prevent it. This MIGHT be enough to keep the market afloat for a while, POSSIBLY. Also, an Inverted Yield Curve PRECEEDS most recessions which has not happened yet. 1-18-08 *THERE IT IS, I KNEW IT. (per the above) Today Pres Bush came out with an Economic Stimulation Package to hopefully ward off recession. A $145 Billion in tax relief so people will have more money to spend. (As you know spending injects the economy and is anti-recessionary). The way I see it there are 2 big 'IFs' a...

No mistaking who was in control yesterday. Now that the markets have August lows out of the way will bears run out of steam? Two internals showing deep oversold territory are the Percentage of Stocks above their 50 and 200-day MAs. For the S&P, the Percentage of Stocks above their 50-day MA sits only 3 points away from its August low of 7.6%. During the cyclical bull market this indicator rarely dropped below 20% - so there is a fundamental shift in this indicator's dynamic. The Nasdaq carries higher relative strength versus the S&P with the Percentage of Stocks above their 50-day MA in the 20s. The 19.75% of stocks above their 50-day MA compares favorably with the August low of 20.93%, but still a shade above the false bottom at 18.84%. However, this metric has lingered around 20% for the past few days as the parent index toppled - an indication that the selling is done. Unlike the comparable S&P measure, the Percentage of Nasdaq Stocks above the 50-day MA has seen a c...

For the first time in this blogs history, every third or so visit has come from a search for "Market Bottom" or variation thereof. Ranking first on the search is great too - ahead of Big Picture , Forbes (old 2001 story) and CNBC's Jim Cramer - that won't happen too often Trade my Stock Picks at

In my newsletter you will see an overall 'Market Health' rating for the current month which is either Bullish/Buy or Bearish/Sell. I base this rating on the state of the market internals (Bullish percents, % stocks above key moving averages, and the Summation Index) and the relative position of the markets with respect to support and resistance on yearly charts. The chart below shows my respective calls since January 2006 for each of the months that followed: It has been a mixed bag with a nice call on 2006 lows, but a missed opportunity on the early 2007 rally. I have remained bullish for December and January as I believe the market is offering discount opportunities for the next rally, particulary in Blue Chip stocks (with Energy perhaps the only sector somewhat overvalued). Looking back at the Nasdaq over the last 10 years there are some interesting observations to be made: The longest losing strength for the Nasdaq was a 6 month period in 2002, which led to the absolute lo...

With markets either in, or about to start, cyclical bear phases I took a look at the extent of the damage which could follow. I started with the semiconductor index (well, the Semiconductor HOLDRs, SMH ) as this was the index most hit by the selling in recent months. I looked at the relative percentage difference between the 50-day and 200-day MAs as this removes some of the short term volatility which can skew daily extremes. The SMH only has 6-years of data, but there is evidence to suggest worse could follow. However, like an elastic band, ever swing to one extreme tends to be followed by a counter move of similar weight in the other direction. During the bear market bottom and bounce, the relative difference between the two moving averages reached extremes of +36% and -27% . The current difference is a paltry +11% (but a bounce could see a 50-day MA rise 8% or more above the 200-day MA). With the S&P it is possible to look back over the last 50 years. Even here it is appar...