Chris Lau - Seeking Alpha

Wednesday, March 04, 2009

The Question of the Year

When will the stock market bottom?

Translation: The stock market is a predictor for the health of the economy and has historically traded about 6 months in advance of a reversal.

Analysis: This question is unfortunately nothing more than a mirage of a question. In actual fact, the volatility index was 50.93. This is nowhere near as high as November 2008's peak @ 89.53. It will be difficult to forecast another down day (followed by rallies) as wide as on Monday. The High/Low ratio (# stocks reaching high, low respectively) also did not register the same peaks to that reached in November.

Conclusion: A bottom is only known in hindsight, but why not try to answer this popular question? The two indicators suggest to me that the market may down more or rally. However, neither direction will be an established one.

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