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.

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

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

Markets continue to toy with a bottom, but the bullish percents haven't suggested one is complete - yet. The Bullish percents for the Dow and S&P sit at logical support. But the Nasdaq Bullish percents have entered cylical bear levels, so look for shorter rallies from this index.

The bounce off November lows has many questioning the validity of the recent market bottom. As I have mentioned before, I like to study the internals such as the bullish percents to get an idea of the quality of reversals as they occur. The big advantage of using internals is their relatively smooth oscillations from oversold to overbought conditions. They are not perfect, but it is relatively easy to filter out noise. Monday's declines with the loss of 200-day MAs for both the Nasdaq and Dow will have driven a knife through many bull's hearts. But how has the (now) six day decline changed the rally off November lows? First up is the Nasdaq Composite Bullish Percent Index. The clearest illustration of the bullish percent working in tandem with trendline support was the August-November rally. Harder to classify is the current November-December decline. Based on the initial (bearish) trendline drawn from the two peaks in late October and early November, December's break was

Moving averages are the simplest trend measuring tool to be found. The following two charts show clearly how market health has changed from a cyclical bull market into a more bearish, counter rally structure. Plotting the percentage of stocks which trade above their 50-day and 200-day MAs, for both the Nasdaq and S&P, gives a good indication to the overall health of the market. When the market is in healthy bull form the percentage of stocks trading above their 200-day MA should be greater than the percentage trading above their 50-day MA. Why? In bullish markets, the faster moving average trades above the slower moving average. In this situation, it is not uncommon for a stock to trade below the 50-day MA, as it might do during a bullish consolidation, without violating the slower, longer term average (200-day MA). In a bearish market environment, the slower moving average trades above the faster moving average. During counter bear rallies it is common for the faster moving averag

Ronald Domingues runs a "G100 Ranking" for the S&P based on participant predictions for the S&P over the next 24 hours. Up to 100 individuals can qualify to participate if they score greater than 35% accuracy in their predictions (currently 33 make the grade). Underperformers are demoted back to a pool, and those from the pool with a greater than 35% accuracy are promoted. Prior to the market open he sends an email out with the results of the poll. This was yesterday's pre-market call: Further information can be found here .