Markets Getting Technical On Us?

Tuesday's rally is being eyed suspiciously as the market moves lower and lower and credit worries abound. Some of the financial stocks are losing faith after their big move up, and the spiral down in commodities is dragging energy and materials shares lower.

But some analysts have been pointing to the technical power in yesterday's move. Whether it's ultimately meaningful or not, these comments are interesting.

For instance, Mary Ann Bartels of Merrill Lynch says in a note today there's evidence the market is close to an intermediate bottom. Yesterday's move was historically significant because it was the second 90 percent up day in a week, she says.

That means 90 percent of all common stocks changing price were higher and upside volume was at least 90 percent of the total of up and down volume. It was the same story last week, when the Dow surged 416 points. But yesterday's move was stronger than last week's surge.

"The last two times that common stock breadth recorded two 90 percent days within a few days were July 2006 and November 1987. Both were significant market bottoms," she writes.

She also noted that the S&P's 4.23 percent rally compared favorably with last week's one day 3.71 percent rise. "This was the fifth time in 28 years that the S&P posted both a rally of more than three percent and a 90 percent up day in common stock breadth. The other times this happened were Aug. 17, 1982; Oct. 21, 1987 Jan. 4, 1988 and March 11, 2008. "The three earliest dates were at the start of two of the great bull markets in the quarter century."

She says its yet to be determined how this current period compares, "but the precedent is impressive."

Here are the problems. Bartels says she needs to see increased volume. Yesterday's volume was the third highest of the year. It was better than last week's big up day, but less than Monday's volume. There are also too few new 52 week highs. New lows still dominate.

Bartels says the S&P 500 reversed its short-term downtrend when it closed above 1320, a level its been hanging around or below in the early afternoon. She says if it can rally through 1350 that would reverse the larger down trend from last October's high.

Scott Redler of T3 Capital writes to us today that 1310-1315 level should hold in the S&P. But "the strength will come in question if we dig deep in the the 1300 level."

Questions? Comments?