February 14th, 2008

S&P Follow-Through Day on Feb 13, 2008?

A picture is always worth a thousand words. So the position of yesterday’s S&P 500 Index plus the four moving averages comprising my Market Timing Indicator (MTI).

While the 60- and 90-day MAs have flipped over, the 180-day has not. While yesterday’smarket’s nice up move (IBD has characterized it as a “follow-through rally confirmation” day, the index has dropped so far since the end of January, it’s still significantly under the MAs. Therefore, I consider the move still only a bounce from an “over-sold position.

The index, the MAs and the support trendline from the August and November lows (plus the hesitation at the beginning of January) look like they’re going to be converging at around 1400. If there’s sufficient market strength to break up through this level with significant volume, than the MTI may morph into 13684 (when the Index moves up between the 60- and 90-day MAs) before the 180-day falls below the 300-day.

Should that happen, it will lend credance to the belief that the market has hit a bottom and presage a signal to resume buying.

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