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Ritholtz: Ten Bullish Charts, Signals and Indicators

Stocks in this article: ^DJI ^GSPC ^VIX

8. VIX Moving Average

The VIX (AKA the Fear Index) hit a multiyear high of 70.90, reflecting extreme levels of emotion in the markets. We like to look at this on a 50-day moving average

VIX Deviation From 50-Day Moving Average

VIX 50-day Moving Average
Click here for larger image.

Readings above 15 over the last 10 years have produced significant rallies. The present reading on this indicator is 26!

--1998 Reading -- Market Up +27% (three months later) and +36% (six months later)

--2001 Reading -- Market Up +22% (three months later) and +22% (six months later)

--2002 Reading -- Market Up +14% (three months later) and +19% (six months later)

If History bears out, this should be a good buying opportunity with a three- to six-month horizon.

9. Losses of 45%-47% in the major indices

The S&P 500 is down 47% from its peak level one year ago, the Dow is off 45%, and the Transports are down 38%. These are relatively rare degrees of loss. Other than 1929 for the Dow, and 2000 for the NASDAQ, these losses have set up a near-term upside move.

Specifically, this sell off is the third-worst decline without a 10% rally on record. According to Bespoke Investment Group, the two that were worse were June 1931 to October '31 (-42.5%) and March 1932 to June '32 (-51%).

10. 2008 vs. 2002

The following two charts show the 2002 lows and the current market. Can you tell them apart?

Click here for larger image.

Click here for larger image.

The first chart is 2002, the second chart is current as of Oct. 10, 2008.

This was originally published on RealMoney on Oct. 13, 2008. For more information about subscribing to RealMoney, please click here.

At the time of publication, Ritholtz was long had no positions in the stocks mentioned, although holdings can change at any time.

Barry Ritholtz blogs at the popular The Big Picture, offering up his macro perspectives on the capital markets, the economy, technology and digital media.

He is CEO and director of equity research of Fusion IQ, a quantitative research firm.

Ritholtz holds a bachelor's degree in political science (with a concentration in philosophy) from the State University of New York at Stony Brook, and a J.D. from the Benjamin N. Cardozo School of Law, where he studied corporate law and economics.

Ritholtz appreciates your feedback; click here to send him an email.

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