A Checklist for Signs of a Market Recovery |
Here’s some interesting information from our friends over at MarketWatch on signs to look for when the market is poised for a recovery.
~~John Cronin~~
By Michael Ashbaugh, MarketWatch
But when measuring the current upturn’s credibility, the following is a checklist for signaling a major market low.
Several, if not all, of the events below need to occur:
• An off-the-charts strong-volume rally that’s not driven by government intervention. Monday’s 400-point Dow spike came on the lightest volume in 18 sessions.
• The emergence of sector leadership. Along with the financials, the airlines have acted well, but these groups won’t do it. Ultimately, the financials will be dead money for some time — several years — and they’ve been propped up through almost daily government intervention.
• At least one, and preferably two, 20-to-1 up days to neutralize the October breakdown. Over the past 11 sessions, the U.S. markets have suffered three 20-to-1 down days, the most recent occurring last Thursday.
• A volatility drop to digest the market crash. For instance, a series of 100-point Dow moves — in either direction — uninterrupted by these 800-point intraday whipsaws.
• From a sentiment standpoint, analysts need to stop declaring how great this buying opportunity is.
• A decisive break atop resistance.
So that’s the technical wish list.
Tags: MarketWatch, Technical Wish List