Friday, June 5, 2009

Mamis Bottom: 2002 -03 Vs. Now

Justin Mamis looked at the technical  and sentiment analysis of market bottoms.  Let's see where we are now and project into summer.















SPY 2002 -03 market bottom shows a similar pattern with Point C bottom on Oct 02 and Point E Aversion in March 03 (approximately 5 months to the test of the low) before positive market movement takes over.


Where are we now?  If we follow Mamis' lead and assume this market bottom will look like Mamis' model and the 2002 -03 chart, we can draw in some projections.  Point C "Maximum Information Risk, Minimum Price Risk" indicates the March 9th bottom of 666.

We should be approaching Point D "Denial" soon.  My projection calls for a pullback this summer as Point DD "Renewed Belief in Negatives" dominates.  In 2002 -03 the re-test of lows occurred approximately 5 months from the bottom, so that would bring us to August 09 with Point E "Aversion".



Sentiment now is very positive with money managers feeling behind the ball on this rally.  The NFP today is being met with buying... which could be viewed as denial of the magnitude of the problems we are facing in the economy.  
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4 comments:

  1. EricJune 5, 2009 at 11:08 AM

    84-87 seems probable for dd.

    but.. besides hot money...

    the 401K money is what makes the bull cycle... and what does that take? Jobs, and Wage Growth, Disposable income to invest...

    but... seems like you are on the right track...

    ReplyDelete
  2. EricJune 5, 2009 at 11:14 AM

    oh... Point D is denial of Positives.

    If we end red.....

    ReplyDelete
  3. TonyJune 7, 2009 at 8:17 AM

    Question. I've been thinking about this. Why does the price hit a near term HIGH on "Denial of Positives"? Seems counter-intuitive.

    ReplyDelete
  4. EricJune 7, 2009 at 11:34 AM

    It's been so long... but Sell the news... It's like we have forgotten about it...

    but not like -300K is "Good news"

    but still "we will see".

    One would think that some form of "Good news" would engage whatever remaining Sideline cash there is.... If a significant decline in the decline of the NFP isn't enough to engage the rest of the sideline cash...What will it take... Jesus to come down and say "Invest"

    I'd love to dig through Mamis this weekend... see how much new stuff I could pick up.

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