Trader Talk

Positives as Market Struggles with Choppy Data

The biggest problem the market has is the choppy economic data we have been getting, which is muting investor enthusiasm despite the Fed cuts.

But there are definite positive developments:

1) we appear to have put in a short-term bottom

2) market up on Friday despite very bad jobs report a good sign

3) Microsoft offer for Yahoo ($44.6 billion, half cash, half stock -- probably not the start of a new surge in takeovers, but positive for liquidity nonetheless)

4) stock buybacks surging

5) new offering calendar is light

6) insider selling still pretty modest.

Still, the big issue is whether this V-bottom really is the bottom; there are some internal signs that make traders question this assumption. Lowry's (the oldest technical analysis service in the U.S.) is out with an excellent missive to their clients this morning, on keys to identifying a bear market bottom.

Here's what to look for:

1) signs that the desire to sell has been exhausted. Their internal measures of buying and selling interest indicates selling pressure has not been exhausted.

2) signs that the desire to buy has been revitalized. They note that genuine buying interest seems to be lacking in the recent rally.

3) the quality of the initial rally. They note that the rally has been fairly narrowly confined to financials, builders, and consumer cyclicals like retailers.

Lowry's conclusion: "the current rally attempt has many of the marks of a short term rally within a continuing bear market."

Questions?  Comments?