Market X-Rays: All the Symptoms of Nearing a Bottom

We have sentiment readings like consumer confidence, which was so severe it fell from 70.3 to 57.5 -- the worst decline ever in both speed and magnitude. Retail was also hitting a wall along with industrial productivity, which is suffering the worst decline since 1974.

If you have been studying the market for any length of time, though, you know that markets tend to bottom when economic conditions are at their absolute worst, and it's hard to imagine them getting much worse than they are right now. With the government and the Federal Reserve ready and willing to take whatever measures necessary to flood the economy with money and support to avoid a major depression, the current situation could continue to improve.

The credit markets are also beginning to loosen and we have support from the oil markets with oil trading near $70 a barrel. That is not something that is likely to hold for the long term, but it sure helps our current situation.

Let's take a look at some X-rays of the market.

Institutions -- Buying, Selling

Click here for larger image.

Source: StockTiming.com

The first notable change over the last few days in the institutional buying/selling chart, which tracks the spread between how much buying and selling institutions are doing on a given day. This relationship is the "control factor" institutions have in what happens in the market and on the VIX.

Over the past few days there has been a dramatic change in institutional activity. The spread between buying and selling narrowed significantly, and selling dropped tremendously. Normally, we would get a trading range from this action, but there is a possibility that an attempt for a strong drive higher over the next few days could push stocks higher.

You can see from the chart that the selling (in red) had reached extremes over the past few weeks but is now starting to drop dramatically. The important key here is that the blue line, which represents institutional buying, has begun to trend sharply higher.