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On Monday, Oppenheimer's Carter Worth told us he didn’t expect the S&P to break much lower. Worth has been pretty accurate in the past, but granted his is only one opinion So we thought we’d ask a similar question to esteemed market technician John Bollinger, inventor of the Bollinger bands. Following is a synopsis of what he told our producers.
Bollinger consulted three charts in an attempt to tackle our question.
First he looked at the Value Line Geometric Index, an equal weighted index of 1700 stocks. He said “the broad market for all stocks peaked in 1998 and we've since been in a long horizontal consolidation. We re-tested the highs last year but now we're at the bottom of the range of the past 10 years.”
In other words patterns in this chart suggest the bottom is here, now.
Then he checked the Investors Intelligence Survey. He explained that patterns above the 0-line signal more bullish investment advisers than bearish investment advisers, and indicated the top. Conversely, patterns below the 0-line signal more bearish investment advisers than bullish investment advisers, and indicates bottom.
Current trends in this chart suggest to Bollinger that we are set for a bottom from a psychological point of view.
Finally, he looked at the Interest Rate Index. He told our producers that this index is often watched to determine whether rally is sustainable or not. It’s been at 0 recently – which suggests that investors are scared and willing to pay any price for safety.
However, “when this index starts to rise, it will constitute an 'all-clear' signal for the stock market.”
What’s the bottom line? When you have a lot of bears in the market you often have a bottom. And there are a lot of bears in this market!
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Trader disclosure: On Nov.25, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Macke Owns (MSFT), (WMT), (UUP); Macke Is Short (TM); Najarian Owns (CTX) Calls; Najarian Owns (ETFC); Najarian Owns (MOT) Calls; Najarian Owns (PHM) Put Spread; Najarian Owns (PRU) Calls; Najarian Owns (UYG) Calls; Finerman's Firm Owns (DNA) And (DNA) Calls; Finerman's Firm Owns (CSCO), (XLF), (MSFT); Finerman's Firm Is Short (USO), (IYR), (IJR), (MDY), (SPY), (IWM)
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