February 9th 2014: An update on bottoms.

This is a followup to my post from January 26th where I was showing some examples of what a stock market bottom has looked like in the recent past.

Here's the updated secondary indicators looking very much like a trade-able bottom is in place now:

Here's a price chart of the $SPX.  I would say that this bottom was different than the last couple which made it harder for me to spot.

We fell very hard, very fast (see Rate of Change at bottom of $SPX chart above) - unlike the August and October lows where we had relatively minor 1% drops.  There was also no positive divergence in the Slow Stochastics (or ROC) vs. price .  What we did do, which was very subtle, was that we tested the high-volume sell off bar from Feb 3rd with much lighter volume and rejected that low.  The test day (Feb 5th), I could see with an intraday chart of $NYUD (nyse up/down volume) that the sellers failed to show up in the morning (nice!).  I also noted that financials failed to make a lower low (unlike the $SPX) which was obvious relative strength (even better!).  At this point, the technicals suggested a bounce was at hand.  However, I also saw that buyers failed to show up in the afternoon of Feb 5th (intraday chart of $NYUD).  To be honest, this puzzled me.  The lack of sellers was great, but why didn't the big volume buyers swoop in?  Often, when we turn, there will be a huge volume spike of buyers and short covering intraday.  Maybe I was early?  Maybe I was missing something?  The $VIX was still elevated, but not breaking new highs.  In the end, I decided not to buy mid-week based on the intraday buy/sell pressure even though the risk:reward was favorable.

Here's the daily charts that I was looking at from Feb 5th (financials show lack of lower low, $SPX comments are on the chart.)

To sum up, this was an unusual bottom vs. recent history.  Next time, I'll focus more on daily charts & relative strength in major ETFs --- and less so on intraday buy/sell pressure to confirm.  The stock market always seems to have one more trick up its sleeve.  For my own trading, I plan on buying minor dips next week with a stop until the trend changes again.  Good luck all.

To see more of my charts and to read a disclaimer, please see my public chart list on stockcharts.com:

http://stockcharts.com/public/1109955