Free charts and backtesting of over 500 stock market indicators, including breadth, put/call ratios and volatility

Market Commentary »

Extreme readings on market breadth coupled with the S&P 500 being near a Fibonacci retracement level indicate that we could see a price reversal. The futures market is currently pointing to a positive open. It isn’t clear yet whether this reversal is a resumption of the upward move from November lows or a normal price reaction.

S&P 500 Fibonacci Levels

Comments (7)

Both comments and pings are currently closed.

1. scott said:
Tuesday, 18th Dec 2007 at 8:25 am

The problem i am having now is that by definition, a bear market is a market that is on average mostly under its 50 day MA, and its 200 day MA. If you look at the charts, well more than half the stocks are under both of these MA. As of before yesterday, the primary sectors were on the fence for the most part or slighly bearish. Yesterday more than half the primary sectors were put into bear territory.

The market price action is trading like its a bear market. The sharpest moves tend to happen in the opposite direction of the trend, as traders cover quickly. The really sharp moves over the last couple of months have been upwards (bear).

Interest rate cuts take a year or more to fully hit the economy, the market will start discounting that 6 months from the start of the cuts or so. The possibility of a recession looms. I think the bull argument is weak for a few more months unless something shows up to prove otherwise.

I like being a bull, but I really just want to be on the right side of trades. So you can interpret my write up as being bull biased, and I am sorry to report, I do not have much positive ammunition.

I think the markete moves sideways to down, but trades like a bear market for a few more months, till some of the issues work there way through the market

2. darex said:
Tuesday, 18th Dec 2007 at 12:12 pm


I thought your comment was insightful. To generalise what you are saying (“The sharpest moves tend to happen in the opposite direction of the trend, as traders cover quickly”) in a bear market some rules and relationships are inverted.

I am wondering whether in a bear market breadth indicators are most accurate at predicting market tops rather than market bottoms as they are in a bull market (I.e. the behaviour is inverted).

It would be interesting to know which behaviours remain the same in a bear market and which are inverted.

3. Mo Shaarani said:
Tuesday, 18th Dec 2007 at 1:58 pm


I think a sure sign of weakness would be if the S&P 500 closed solidly below the 1430 level, but as I said before, I would also have to consider the indicator action before I form a new view. I agree that the fundamentals aren’t great, but they never are at potential entry points. A great buy signal would be having all sectors firmly below their moving averages. So, maybe it’s a bit early for a major bottom, however, I am aiming for a move to near the all time high before the next big down move.


Yes, it would be very interesting to see how these indicators behave in a bear environment. However, I don’t believe that a bear market is the perfect inverse of a bull market. This is probably because each is driven by a different emotion. I think fear is a greater producer of knee-jerk reactions than greed. (PS: Please use the ’same’ email address when leaving a comment. This will allow your comment to avoid the ‘trust’ filter, and make my job easier :))

4. scott said:
Tuesday, 18th Dec 2007 at 10:39 pm

Hi Guys,
Mo, seems to me most of the charts are flashing clear down channels or many charts seem to be forming pendents, Lower highs, higher lows. Strangely almost all the pendents i have seen in the last 2 months have failed to the down side, even clear cut bull pendents one of my favorite trades are failing to the downside. I do not know what this means. Even when there is an localized uptrend.

I am not sure there is much motivation to buy long into a questionable market. The Xmas rally “seems” to have lost its luster. Bottom fishers and value are likely buyers at the moment. In fact most of what I think i am seeing, even with a bounce due, is a lack of buyers. It is possible buys come back in with a vengeance as we saw on the last pop.

Pouring over the charts this evening, I have to say that I just cant tell what is happening. Makes me say sideways but trading like a bear. What i mean by that is that you have to take profits quickly in this market, which ever way you play, if you trade.

It feels like a bounce is happening right now, but not confirmed. Can not even begin to guess how big it might get. As a rule of thumb right now things are bouncing off their daily chart 50 MA either direction the movement is taking us.

I need to qualify my bias a bit more, I still like tech, that sector is one of the next sectors that pops after a bear market, according to sector rotation theory. I tend to over watch tech, and I bias towards what qqqq and the S&P are doing. I do check out everything. The charts in tech are ok, but weakling in ways i am not comfortable with.

Hey Mo, any chance we can get charts in the evening? and how about sector charts?
I love these charts Mo. Thanks so much for putting in the time and effort.

I normally do not talk this much, but seeing how there are so few folks messaging, I thought I would contribute what little expertise I might pretend to have. :) Maybe most of what I am saying is for my own clarification of ideas.

All I got to say is thank God I have a 20 year market mentor behind me that I can run ideas off of.

Please do not consider me a mentor. I am learning also and feel it will be years more work ahead. Feel free to correct anything I say, I need all the input I can get.

5. Aman said:
Tuesday, 18th Dec 2007 at 11:35 pm

One way to guage sentiment is to guage your own sentiment, thats what I try to do often. so I see the tape getting ugly, and I feel like throwing in the towel, but those are exactly the tradeable bottoms which can be very profitable. If you look at the weekly chart of S&P 500, the up trend remains mostly intact, and so, in respect of that, and some of the negative sentiment, makes me a bullish on the market short term. I agree with Mo that we probably are going to test new highs before any movement lower. VIX remains in an uptrend so the move up or down will be rally choppy, and Put/Call could be higher, but doesn’t have to be as Mo had pointed out in a previous post that well, basically we are going on down on similar anxieties and thus the market participants are a bit more prepared or better even out of the market. There is a lot of money in the treasury market, which just can;t really stay here, and I do believe that funds are slowly taking profits on emerging markets, and thus there is tons of money to provide a bid to the market come January. Stabilization in financials and retail sector is what we need.

6. Mo Shaarani said:
Wednesday, 19th Dec 2007 at 5:57 am


Thanks. For technical reasons, it won’t be possible to get evening charts at the present time, however, some sort of sector coverage is a possibility but could be a while before then. Too much going on just now.


Nicely summed up. The part about “gauge your own sentiment” was very insightful.

7. scott said:
Wednesday, 19th Dec 2007 at 9:07 am

Hi Guys,

Its so funny I wrote my last post when i was feeling down after looking at all the evening charts. I was a bit under the weather and was felling panicky.

I realized this a short time after my post. And one of the things i know for sure, when i feel panicky and feel like i need to be shorting the market the most is when i should be doing exactly the opposite.

So shrugged off my blues and sent off an email to my mentor. He confirmed. So i sleept like a baby last night.

What i have at stake is a couple of options with low exposure that are expiring soon, so i am building up anxiety over them. that are right at BE.

Sorry guys did not mean to bleed into the group.

thx AMAN and MO

Waiting to see what happens at 2:30 today.

Select a Stock Index:  VS Indicator:   Indicator Smoothing:  Range:  Theme: