Today is a great day, and a very high probability is that the market has formed an intermediate term bottom. Here are the reasons:
- 0.0.1 Market Top/Bottomed Watch. We have all bottoming patterns on the chart, and confirmation by Bullish Morning Star as well. Many candlestick patterns require a confirmation on the next day, Morning Star doesn't because of its high accuracy. So this is very encouraging.
- 1.0.5 Major Accumulation/Distribution Days. In fact, the best news today is the Follow-through Major Accumulation Day. Concerning the Major Accumulation Day, once two major accumulation days show up, there will be a decent rally afterward. According to the record on the StockCharts.com, it has never been wrong (refer to charts from 8.2.0 Major Accumulation Day 2007-2008 to 8.2.5 Major Accumulation Day 1997-1998 should you need a verification). More details are given in 09/30/2008 Market Recap: Major Accumulation Day. More complete statistics shows that the market goes up for 22% on average within 60 days after the second major accumulation day. Moreover, take a look at the blue circles on the following chart, you will get a deep impression why it is risky to buy after the first major accumulation day and better to wait for the second one.
- 2.4.3 Breadth Oversold/Overbought Watch. In a rational market, the current level of NYA50R and HYHILO should be a mid-term bottom. Should the market goes back to rational from today, this chart will be a good news, because the breadth is still extremely oversold despite of big rally today, and the oversold has to be corrected by further rally.
In summary, the outlook in the mid-term looks bullish. 0.0.0 Signal Watch and Daily Highlights, let's take an overview to today's signals which are corrected in some extent, however the breadth signals are still oversold as aforementioned, on the other hand there is no single buy signal. Does "no buy signal" mean one should not buy? There is no sure answer to this question. Allow me re-emphasis that there is no 100% accurate signal, you have to do your own due diligence. If three points given above are sufficient to take the risk, or if it is better to wait for the mid-term buy signal, different traders can endure different levels of risk and thus have different opinions. Even the mid-term buy signal could be a whipsaw, and is not 100% safe either. In addition, mid-term signals are often lagging indicators, and the relative safety is achieved as the cost of profit.
Over the short term, or specifically tomorrow, where will the market go? It is hard to say, but in the early morning the market might pull back. QQQQ is also not far from the resistance, if it can break the resistance? I have no idea.
1.0.3 S&P 500 SPDRs (SPY 60 min). SPY is still far from the gap resistance.
On 15-min charts, however, RSI on 1.0.4 S&P 500 SPDRs (SPY 15 min) and 1.1.5 PowerShares QQQ Trust (QQQQ 15 min) are extremely overbought, so at least the market will possibly pullback in the morning.
A few interesting charts:
3.0.3 20 Year Treasury Bond Fund iShares (TLT Daily), oversold.
3.3.0 streetTRACKS Gold Trust Shares (GLD Daily), the pattern of GLD looks like a double top, and the target is 70.
5.0.2 S&P Sector Bullish Percent Index. Look at the sector Bullish Percent Indices, majority of them are still at 10-year low. In theory we have a good entry point now.
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