The indicators above are described in the first few chapters of the textbook. We're still in a bear market, folks. The volume at the recent bottom (at 667) indicates we are still in the 2nd phase of heavy selling. A key sign of a bottom will be:
- Low volume on new lows. Everyone who is going to sell, has sold. By this time, it's only the discouraged people who braved the whole storm, and are finally deciding to sell the smoldering remains of their RIA, to salvage a future of ramen noodles and deli ends.
- Higher lows after each successive intermediate trend. We've seen no such lows. Yes, it's possible the next low will be higher, but right now it's certainly too early to state that as fact.
- Breaking out of set trends. As you can see in the chart, we're still in an overall downward channel. If we break out of that, it will be a glimmer of hope that we are entering a new phase. Note, this "channeling" can be done on multiple time frames. On a weekly timeframe, we can see how the S&P broke out of a month long downtrend, and formed a new uptrend: http://4.bp.blogspot.com/_p6aF9Trg38U/Sc6X-3u4AtI/AAAAAAAADGM/aSH3zT4hufg/s1600-h/2009-03-28_1624.png But on a daily chart (thumbnail at top), our current rally is merely another oscillation in the larger, broader downtrend. Go long the short-term rally if you have the daily time and attention. But just remember to look at the big picture.
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