Well according to Jim Cramer, yes. I say probably no. Or let me rephrase it, a temporary bottom. I want to show you my indicator for a major index that goes back to the second world war.
Take a look at the right, and you will see the current market conditions. What concerns me is that we penetrated the -0.05 indicator. That for me is a very meaningful indicator because it is a sort of break point. If the dip does not hit 0.05 then the market rebounds quite nicely. Though if the -0.05 is broken we are in for a rougher patch.
I did some Monte Carlo analysis and the bottom that we reached might be a true bottom. Cramer might right after all. BUT there is going to be some real testing of the bottom coming up.
When I look at technical indicators I always try to build a context. And the context is that we went too fast down and going up too fast.
Let me put forth another theory. I know from speaking to some people that equity traders are making quite a bit of money. So what if this volatility is due to traders trying to make money? What if this is due to traders trying to shore up the balance books to make up some of the losses?
Put yourself into the CEO’s of the major investment houses. You are getting crushed by the other bets made last year. Yet the equity traders are making money hands over fists. Are you the CEO going to say, “Please stop trading?” Not a chance!
So looking at my indicators and the general context I am not upping my buy orders. I am standing firm. Maybe it might be the wrong decision, but somehow I doubt it…
To put things in context. If the market for the next two weeks were to increase a mere 0.5% per day we would be above our highs in a mere 3 trading weeks! That is not good and tells me we still need to wrangle through this market.