Analyzing the Market's Last Bottom

The picture above (click to enlarge) represents the past 6 months for the S&P 500. Many investors have said the "stock markets have bottomed". Let's have a look at the last stock market bottom which took place in October 2002 (click on chart to enlarge, below).




You can see the first low on July 02 with a quick recovery 2 days later. This is similar to the lows of last November , 2008. This has formed a support line somewhere around level of 820. Later, the S&P 500 made several retests and finally dipped, but not below its intraday low from July.

This is similar to our last low in 2008. We saw 2 days of reversal at the end of November. The primary support line is now at the 800 level. Secondary support is the 52 week low at 750 points. And right now we are retesting that primary support line.

Here (click to enlarge) is the broader view of the last stock market bottom...



You can actually see 3 lows. The second, lower low (in closing prices) also had bullish divergence in many technical indicators (RSI, MACD).

Comments

[smilingpilgrim:]

wrong comparison, because the 2000 crash was not caused by a structural collapse ... a more proper comparison to make is to compare S&P500 07/2008 thru 02/2009 against DJI 07/1929 thru 02/1930 ..... in fact today we are doing much worse than they did in the immediate aftermath of the last truly comparable crash of 1929 when the market recovered more than half of its losses in a sustained run up to the end of 04/1930; then of course it resumed its devastating slide to 89% total loss.

Since we are not getting a repeat of the early 1930's recovery, I believe that investors/algorithms are set to at best expect muddle through markets for a couple of years, with occassional trading rallies, otherwise known as L-shaped recovery.

IMHO Pilgim

Feb 07 02:30 AM