Hourly Chart of S&P-500

The markets have had a great start to the day. Many are showing gains of greater than 3%. Will the gains hold? You may want to take a look at a few developments on the hourly chart of the S&P-500...

The bullish signs (but):

A potential positive divergence on MACD, which we'd first shown you a couple of days ago. The big test comes today, however. We've extended a line from the middle peak of the divergence; now, MACD has to move and stay above the "confirmation line" in order to complete the positive divergence. If MACD is not above that line, the positive divergence has to be seen as incomplete or even as having failed.

RSI has moved above its centerline. However, if you notice, that has been a reason to sell in the recent past. As long as RSI stays above its centerline, the bulls will be in charge of the short-term trend. If it falls below, we could see the beginning of the next downwards leg.

The bearish signs:

The index has smashed up against the upper bollinger band on the hourly chart. That band is flat to slightly rising at the moment. It needs to start to rise sharply or else the bounce will fail.

Final Comments:

So, there are a few countervailing factors and traders will have to weigh them against each other. The lack of a final selling climax does worry a few traders; we are amongst that list. A handful of analysts have claimed that a selling climax is not necessary and that the steady drip of the past several weeks can be seen as a process of capitulation (that is complete). They may be right. Who knows? We'll soon find out.

And, for what it's worth, Mark Haines (CNBC show host) has said several times this morning "this is the bottom." Okay!

Has the Stock Market hit a Bottom?

Okay, let's not get too foolish and call this the bottom (such a thing can only be confirmed after the fact, of course).

But having said that we are finding signs on the short-term charts (refer to the most recent blog post "S&P-500 hourly chart") that could call for a sharp short-term reversal at the very least. Shorts may want to be careful and even consider booking profits on at least a good portion of their winning short stock and bearish options positions.

Make no mistake, there are no buy signals at the moment and taking long positions may not be prudent just as yet, but it is probably time for shorts to start thinking about the risks.

Nightly Commentary - Feb 23, 2009

The following is the nightly commentary piece that was provided to members of TheMarketMessenger.com, on Monday evening.

The major indices each lost just under 4% today. Many have also incidentally closed below long-term lows.

Aside from the Nasdaq indices, most indices are now in oversold territory, which as we'd mentioned in the weekly commentary piece does not mean that a bottom is already in place but rather that the slightest instigation could soon (as in time, not necessarily price level) bring about at least a dead cat bounce that ends up killing a good number of short positions.

Let's take a look at the charts.

S&P-500 Index - Daily Chart...

SPX closed below its November '08 lows today. At 743, today's close fell just short of breaking the intraday lows from November, but it happens to be at an 11-year closing low nevertheless. Volumes were above-average again today, which is a good sign for those of us looking for signs of capitulation.

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