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Ritholtz: Ten Bullish Charts, Signals and Indicators

5. 90/10 days

Paul Desmond of Lowry's Reports ( interviewed here ) has studied every major market bottom going back to 1900. One of his discoveries was that as we approach the bottom of the selloff, the ratio of downside volume to upside volume approaches 9:1. Several of these represent major distribution by funds, and a low cannot be put in until selling exhausts itself.

When a 90% upside day shows itself, that suggested institutional buyers are coming back into the market.

This week has seen three 90% downside days, reflecting massive liquidations, and Friday is likely to be the fourth. They can only continue for so long before investors run out of shares to sell.

As noted above, scaling into long positions is the smart approach. We would become more aggressive buyers after the first 90% upside day. This has historically created a good entry for a one- to three- to six-month holding period.

6. Percentage S&P 500 over 200-Day MA

In the past, I have discussed the percentage of stocks over there 200-day moving average, on either the NYSE or the S&P 500. This is yet another quantitative method for determining when a move has simply gone too far in one direction.

Percentage of S&P 500 Stocks Over Their 200-day Moving Averages
Click here for larger image.
Source: StockCharts

Looking at that did it for today, we see that the percentage of stocks trading over their moving average at the NYSE is down to 6%, and on and on the S&P 500, it's about 1%. These are extreme levels, far below even the 2002 lows. Yet another historically excellent entry point.

7. Gold vs. SPX

The cost of an ounce of gold is now greater than the S&P 500; This last occurred in the early phase of the 1982-2000 bull market, sometime around 1984.

At the peak of the 2000 stock bubble, one ounce of gold bought less than one-fifth of one unit of the S&P 500.

While the relationship is not at a horrific extreme, seeing the price of gold over the cost of the S&P 500 for the first time in nearly 25 years is significant.
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