The Daily Chartist: What It Would Take for a Bottom to Hold

The Chartist describes what we would need to see to believe we had hit a lasting low.
Author:
Publish date:

Sept. 22, 1999

Instead of reiterating the same old bearish comments here today, I've decided to describe what it would take for us to believe we have seen a bottom that would hold: a break of the Aug. 10 lows in the

Dow

and

S&P 500

(10,487 and 1267, respectively), while the overbought/oversold oscillator holds at a higher low, showing a slowdown in downside momentum.

In conjunction, I think we would also have to see fewer than 337 stocks make new lows (that was the peak reading on Aug. 10), which would tell us that much of the selling has been done. These two items would be significant positive divergences.

We have not seen any signs of that happening yet. What is important is that the oscillator continues to get more oversold, instead of rallying. When an oscillator is oversold and cannot rally, it is a sign of a weak market. And, while the

Nasdaq

may look like the place to be right now, it is quite vulnerable as well.

New Highs and New Lows

Overbought/Oversold Oscillator

Cumulative Advance/Decline Line

Dow Jones Industrial Average

Helene Meisler, based in Singapore, writes a technical analysis column on the U.S. equity markets on Tuesdays and Fridays, and updates her charts daily on TheStreet.com. Meisler trained at several Wall Street firms, including Goldman Sachs and Cowen, and has worked with the equity trading department at Cargill. At time of publication, she held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback at

KPMHSM@aol.com.