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Are we in the bottom line?

All this week we have seen the SPX going down and down, until today we are seeing it near to the low of the so called flash crash. But  looking in to a USA based portfolio, with fundamentals going well, economic data in the sunny side, and a big fear from the other side of the street, technicals give us a good way to understand where we are.

Historical data show that S&P 500 has hit the threshold of the 30 pts  in RSI ( Relative Strenght Index ), ten times since April 2004, and in 9 opportunities has triggered a bounce back. Those rebounds gave a media of 16% of profit relief to investors.

Yesterday the index hit the 30 pts line in RSI.

Also, the Bovespa index sank to 23 pts in the 14-day relative strenght index. The last time the RSI was this low, on May 10 2004, the Bovespa surged 23% in the following three months.

This indicators, and the fact that the Euro is taking support on the USD 1.25, are evidence that maybe we are now in the bottom  line of this correction. The german upper house of the congress gave aproval to the rescue package to the euro nations today, so may be this will drive the market in a better mood.

Chrystian García