NOTE: This Market Commentary alert was originally emailed to subscribers at Ritholtz Research & Analytics on 1/23/2008 before the market closed.
This is posted here not as investing advice, but
rather as an example of a trading call for potential subscribers.
Last week, we noted the % of NYSE stocks trading below their 200 day moving average was about 23%. That suggested we were close, but not at a tradable low.
Today, our trusty Bloomberg terminal is showing just 13% of NYSE stocks trading above their 200-day moving averages.
That is lower than anytime in the 2000-02 bear market. And lower than anytime in the 1998 and 1994 bear markets.
This indicator is saying that sentiment has become excessively negative — considering we are only 3 months off of the all time S&P500 highs.
This suggests we should begin the counter-trend rally shortly. We would expect this to last anyway from 2 weeks to 2 months, run 5-15%.
We also would use this upcoming lift as an opportunity to sell equities.
This is a bounce, not a major shift in trend . . .
January 23, 2008