Both the NYSE and Nasdaq McClellan Oscillator posted new all-time lows. I have annotated with black arrows the areas where lows at similar oscillator levels were signalled in the parent indices for the past 6 months. The indication is that this is a start of a zig-zag bottom before the rally can begin, although the indices are likely within 2% of a bottom. I suspect Tuesday will see an attempted rally before bears try and push it down again Wednesday. Futures are up as of 4.30am ET. A quiet news week would support such a zig-zag bottom before a trigger 'news event' can drive the market higher.

We are nearly half-way through March and it is on course to register another down month. Even during the worse of the 2000-2002 bear market it was rare to see more than 4 down months in a row - the worst run was 6-months which marked the very bottom of the market in 2002. Even in that instance, the low created after 4-months held as support for the subsequent 2-months. Will we see 2,202 hold as support?

A Nasty Jobs Report and futures down big. The Nasdaq looks to have most to loose as the January low is only a short stones throw away.

The indices were thrown back into the quagmire of the past 2-month consolidations as the Bullish Percents flipped negative once more. It was interesting to see the DOW hold 12,200 as support: With a comparable support level (1,324) visible for the S&P: But resistance, rather than support, was clearer for the Nasdaq: Given the position of the bullish percents, should one view them as bullish or bearish? Bears will look to the lack of oversold conditions in the bullish percents as an opportunity to push stocks trying to lead a rally out lower. Bulls will see increasing strength from stocks posting new breakouts on point-n-figure charts as diverging from the weakness in the indices. As fewer and fewer stocks drag on the indices, the quicker - and sharper - the resulting rally will be. I hold to my opinion that January lows mark a significant bottom, but these may be violated for a brief period. Long positions look more favorable than short plays, but cash is not a bad place to be as

There was an interesting relationship between profitable long trades in the S&P and the Zig-Zag indicator applied to the VIX. Over the past 10 years there have been 4 periods when a trade initiated at turns in the Zig-Zag indicator have turned profitable long trades - with no failures. The 'buy' side Zig-Zag signal has matched reaction lows in the S&P very nicely. The 'sell' side Zig-Zag signal has been a little early, although during the 2000-2003 Bear market it gave a perfect signal. However, one thing which has been consistent across 'sell' signals has been a lower 50-day MA compared to the 200-day MA. In the current market, this would approximate to another 6-months of VIX weakness/sideways action (and higher market prices). In terms of S&P returns it could be anything from 15-50% depending on market conditions (likely the lower end of this range for a bear market). Does this rank as another tick in the bull column?

The Nasdaq Bullish Percent turned bearish with a drop below its 5-day EMA. If this weakness was to represent itself in the index I would look for a new closing low for February (but not necessarily a break of the month's intraday lows). However, the index does sit close to a break of declining resistance connecting January, and both February reaction highs - a big day this week would break through this resistance and likely negate the 'sell' trigger in the Nasdaq Bullish Percent: Better was the leading action in the Dow Bullish Percent. It finished Monday at 33% having managed a new reaction high for the month. This strength filtered through to the index Monday when it made its first break of the two reaction highs for February. Look for this strength to continue with a further push above 12,750 (but 12,200 can't be violated on a closing basis): The S&P Bullish Percents has yet to push above its February reaction high. The action in the index is a little better in t

After a good day on Wednesday, what can the bulls pull out of the bag next? On a closing basis there was a modest resistance breakout in the S&P, helped by the earlier February 12th 'Buy' signal in the Bullish Percents. Having said that, the S&P Bullish Percents need to break 35% soon if the momentum of the signal is not to be lost. The Dow Bullish Percents do exhibit better health, only the index has to pick up the pace. Closing support at 12,200 remains strong. The Nasdaq Bullish Percents still ride the January 24th 'Buy' signal, but a breakout has yet to occur in the index.

Current market opinion is available daily at my parent site . Subscribers to my newsletter get this information delivered to them by email. The 20-day MAs became the first scalp for bulls. Volume did measure as a (modest) accumulation day, negating Tuesday's distribution day. Last week's gaps for the NASDAQ and NASDAQ 100 are the next challenge on the menu for tech indices. The leading Russell 2000 , which was able to nudge a break of its 20-day MA yesterday, now has the 50-day MA only some 10 points away. Again, if the Russell 2000 breaks its 50-day MA I would expect the other averages to follow suit. Large caps [ Dow and S&P ] have a little further to run before they get to their 50-day MAs, with the tech averages ( NASDAQ and NASDAQ 100 ) the furthest away. However, the semiconductor index may help the latter indices as it closed 6% off its 50-day MA. The other area running in tech's favor is the relative leadership of semiconductors over the NASDAQ 100 -

There is one stock for today, Contango Oil and Gas ( MCF ) available in the free section of my main website and made available to readers of my newsletter. As for the markets it is still a waiting game to close last Tuesday's gap breakdowns, although the 20-day MAs are likely to get in the way first. As a sidenote, there is an interesting divergence at play in the Percentage of Stocks above the 50-day MAs. When the market bottomed in January only 15% of Nasdaq stocks were above their 50-day MA. This rose to 26% as the market made a new closing low for February. This divergence is further supported by the bullish divergences in the Ultimate Oscillator and MACD trigger line. Also look at how a negative divergence played out during the October top. Trade my Stock Picks at

The McClellan Oscillators held their bullish form as bulls stepped in, with volume, to stall 3-days of declines. At least on a closing basis (ignoring the intraday range) both the Nasdaq and NYSE are on course for a double bottom; confirmation will come on a closing break of 2,400 for the Nasdaq and 9,250 for the NYSE. Dow Theorists will take comfort in the strength of the Dow Transports. Note how bulls maintained control as other markets reversed from their late January bounce [+DI > -DI; ADX > 20]. Stochastics are overbought which suggests a pullback to test the 50-day MA is needed to shake out the last of the weak hands. Volume in this index has certainly sided with the bulls. Volatility watchers are unlikely to see another spike into the high 30's on this decline, and those waiting for a second spike before buying are likely to be disappointed. A push back to the 200-day MA would look to be the most likely scenario. Nasdaq theorists will look for the semiconductors to

Wednesday's selling - the third day of selling in a row - has started to pressurize the Bullish Percents and the validity of the January bottom. The Nasdaq bottom remains healthy and looks to be part of a bullish retest of prior lows. The Dow Bullish Percents have breached their 5-day EMA (bearish), but remain in deep oversold territory. More worrying is a similar breach of the 5-day EMA for the S&P Bullish Percents, but unlike the Dow, the crossover occurred away from oversold levels. Watch for the S&P to lead a break to the downside and through January lows. Both Nasdaq and NYSE McClellan Oscillators finished in positive territory which is bullish (just!).

I was trying to remember which blogger had talked about the McClellan Oscillator but couldn't find the reference post (Sorry!). This is an indicator which I had overlooked in the past, but is another useful tool (if a little whipsawy). The crossover in the zero line gives an indication of bullish/bearish strength in the market - although given the whipsaw one should perhaps wait for confirmation on a move past +/-10. After Tuesday's selling both the Nasdaq and NYSE Oscillators are (holding) bullish - but another day of selling might change that. Of the market internals I do follow, the Percentage of Stocks Above the 50-day MA started to crack (it is usually the first to do so). However, the bullish divergence in its MACD holds with an overall technical picture which is net bullish. The other market internals; Bullish Percents and McClellan Summation indices, still support the January bottom. The S&P is doing its best to map out what I thought would happen over the coming w

Thursday's rally may hurt bulls more in the short term because of the rapid nature of the advance, even though both 20-day MAs and August lows were breached on a closing basis. Bears will see any correction as a vindication of their position, but bulls will have room to work support at Fibonacci retracements and / or January lows, depending on the complexity of the next downward leg. Last Friday I mapped a possible route for the S&P ; the early form was relatively easy to predict, more difficult will be what happens from here. There is still a great deal of skepticism out in the broader media world thingy, but it is the kind of doubt which would suit the contrarian. Datawink (sidenote: his chart pattern recognition tool is nifty, check it out and bookmark - it is a beauty ) sees trouble in the Dow components. Bill over at VIX and More is sounding more optimistic for a bottom. Stockbee points to weakness in breakout stocks and views recent volatility as typical of that bear

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:

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

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