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I found some great charts that I saved some time ago from various sources.  Above is one from Arthur Hill.  The CCI never reached the very oversold area which hints at remaining strength in the market.  A re-test of the price lows while the CCI remains above the -100 level would be a positive sign for the market.

Here's another chart from Arthur Hill.  While the moving average of high/lows is below the zero line the market is in correction.  This method also kept Arthur Hill in the market during the March correction since it never dipped below zero.

The put/call index has moved up to a level where it is getting close to a buy signal.  The smoothed MACD will help determine when to pull the trigger with a cross under.

Some very nice movement in the bullish percents is shown below.  Many of the indicators hit bottom in the very oversold 20 to 30 area and turned back up issuing bull alert signals.  The best scenario would be for additional up and down movement at these low levels for a few weeks, and then for the bullish percents to break above the current readings.  We are likely to get this type of action soon because the market is quite overbought on a short-term basis. 

These McClellan ratios are well into the overbought zone, particularly for the NYSE reflecting the strong bounce back in prices after the punishment the market took the prior week.    

All four surveys moved down nicely this past week which adds to skepticism and worry about the market, and from a contrarian point of view, this is helpful towards the stock market.  It is really interesting though that both the individuals and bloggers had been so negative towards the market for so long while the market was going up and the economy was decent.  Now that the market is clearly suffering and the economy is trying to absorb a huge shock, both the individuals and bloggers more bullish than usual.

The real story though is the nice movement of the investment letter writers.  The best opportunities are presented when the bulls are bears are about equal, and this is almost the case.  From a contrarian point of view, the skepticism of the newsletter writers is favorable towards equities. 

The chart below helps illustrate the continued movement of the newsletter writers into the area where the percent of bulls and bears is about equal.  This is a very good sign for the stock market.

The survey information above can be obtained for free via the following sites.  Investor's Intelligence is from Market Harmonics.  Individual Investors is from aaii.com.  Low Risk is from lowrisk.com.  Birinyi Bloggers is from Ticker Sense.  For additional information about market sentiment, I recommend a blog by Brent Leonard.

Sentiment analysis is an important component when following the markets, and is considered a “contrary” indicator.  Contrary because if too many people are bearish then there aren't enough sellers left, the balance tips to buyers, and the market starts to advance.  If too many people are bullish, most funds are already invested, the balance tips to sellers and the market weakens.  One way to determine if investors are bearish or bullish is by taking surveys and tracking at what levels these polls indicate investors are at the extremes of bearish or bullish sentiment.

Keep in mind, sentiment analysis is not a science and only provides very general information.  Sentiment is not a signal to take action, but provides background about the current state of the markets.  For instance, there have been many occasions when bullishness reached high levels well before the market started to weaken.

I'm bored with my own charts, so I thought I'd swipe from Corelio's List in the public charts section of Stockcharts.com.  I can't vouch for the accuracy of the list below, but I thought it was a great presentation.  No surprise that defense, medical, staples remain the leaders.  If there were a Fidelity agriculture fund I think that would be a leader too.  These are the areas I'll be focusing on when the bottom is in for this correction. 

In a market under a lot of stress I wouldn't think of Biotech as a place to invest.  But this index has been correcting since last fall and may be ready for a break out.  This is another chart from Corelio's List. 

I borrowed this chart from John Murphy and it shows this index has pulled back very nicely to a long-term uptrend line after reaching long-term resistance that dates way back to 2000.  The bullish percent for biotech is in the very oversold range. 

The individual investors and Birinyi bloggers have gotten somewhat bullish just about when the market has experienced a 10% pullback.  Nice timing on their part.  I'm not sure how to interpret it though from a contrarian point of view.  They were bearish for a long time looking for a buying opportunity, and now they have it just when the economy is facing a very serious challenge. So they were bearish while the economy was gaining strength and looking decent, and are now bullish when the outlook for the economy may be turning down.

The Newsletter writers remain subdued and somewhat bearish for them.  The current reading is approaching the low end of their range, and this fits much better with the standard pattern in which sentiment is bullish at the market top and bearish near the bottom.  Investor's Intelligence has stated though that they would like to see more negative sentiment with a higher level of bears.  When the level of bulls and bears is about equal the best opportunity is presented as shown last summer. 

The chart below illustrates the point really well that although the bulls have pulled back and the bears have increased, there is still room for more skepticism towards the market. 

The survey information above can be obtained for free via the following sites.  Investor's Intelligence is from Market Harmonics.  Individual Investors is from aaii.com.  Low Risk is from lowrisk.com.  Birinyi Bloggers is from Ticker Sense.  For additional information about market sentiment, I recommend a blog by Brent Leonard.

Sentiment analysis is an important component when following the markets, and is considered a “contrary” indicator.  Contrary because if too many people are bearish then there aren't enough sellers left, the balance tips to buyers, and the market starts to advance.  If too many people are bullish, most funds are already invested, the balance tips to sellers and the market weakens.  One way to determine if investors are bearish or bullish is by taking surveys and tracking at what levels these polls indicate investors are at the extremes of bearish or bullish sentiment.

Keep in mind, sentiment analysis is not a science and only provides very general information.  Sentiment is not a signal to take action, but provides background about the current state of the markets.  For instance, there have been many occasions when bullishness reached high levels well before the market started to weaken.

The Friday sentiment will be posted later today.

If you use the bullish percents as the primary tool for market timing and investment decisions, now is the time to pay attention to them.  I'd like to see the NYSE and the SPX above the 200-day before putting very much money back into the market.  But with the NASD and INDU still above the 200-day, and the encouraging bottoming action over the past week, it looks like an opportunity is being presented.  I think there is still lot's of risk to the economy and stocks, but there is probably some time to be in the market before the impact is felt.

The extreme oversold stocks are tempting because they look like such bargains, but this late in the bull cycle its probably best to stay with the areas that held up during the selling.  Also, I'm avoiding most of the financials because they face such headwinds.  With rate cuts almost certain in the months ahead I am sticking with gold & silver, but need to see some strength before getting too committed. 

Many market-timing blogs will be filled with comments about today's wild ride in the market.  It does appear the capitulation finally occurred and that an intermediate low may have been touched.  But I can't imagine that I have anything more to add than the other bloggers so I'll stick with the usual Thursday commodity review. 

Many commodities and indexes moved lower over the past week.  Weakening commodity prices is an early indication that the economy may be slowing again, although more time is needed to make that call.  John Murphy mentioned that the markets have become highly correlated lately, and it is likely that some of this commodity selling is because investors need to raise cash to cover as the Yen surges and other investments collapse.  The bottom line is that commodity prices are not currently supportive of the equity market.

The Yen is playing a huge roll in the markets at the moment as demand for Yen has swelled as positions unwind and Yen carry-trades are closed.  I had read that the Yen had surged in price, but I had no idea it was to this extent.

The Australian and NewZealand Dollars have fallen in dotcom style over the past few days.  These are high-yielding currencies that have been heavily dependent on high commodity prices and the global building boom.  Is this an early sign that world growth is in trouble?   

Another bad day in the market.  The SPX is decisively below the 200-day which invokes the Faber-rule to be out of the market and stand aside until the SPX breaks back above the 200-day.  I am not quite that disciplined to be entirely out of the market, but my holdings are very conservative.  I remain about 25% invested in utilities, non-cyclicals, precious metals, but with a hedge of some ProShares inverse funds. 

I don't see anything much that is interesting at this point in the breadth, volume or momentum charts.  They are all very oversold.  New lows continue to be extremely high indicating continued punishing distribution in the market.  I thought it might be more interesting to take an early look at the bullish percents.

The only holdouts above the 50% level of the major indexes are the dow industrials and nasdaq-100.  It is an impressive showing for an index to have over 60% of stocks on P&F bull signals in a horrendous market like this.  And likewise for the SPDR sectors that are holding up as well such as technology and telecom.

At the moment, my guess is that the equity market is rapidly approaching a capitulation selling level and these remaining areas of strength are going down with the rest of the indexes.  The remaining areas of strength may be the first to snap back when the market recovers, but they may have to go down before the market bottoms as margin calls, fund redemptions and extreme fear forces unplanned selling. 

The dk-report had a nice post today that I recommend reading.  Basically he said the market remains under pressure, no significant signs that a bottom is in, breadth is oversold but still has a little room to move lower... while the economy is still decent and therefore we have a good set up for buying in the coming weeks. 

I agree with all this except I am perhaps a little more concerned about the economy than he is.  Maybe he has a cooler head than I do during a time like this, but I think you have to be concerned with financials and consumer stocks under so much pressure.  We also may be looking at different time frames.  John Murphy pointed out that it took a year from the time of the dotcom crash before the economy was declared in recession. 

Supporting the view of dk-report is the ECRI economic index.  This index has declined and is headed lower, but is still at a level showing growth ahead.  I think their predictive time-frame is about six-months.

The breadth analysis is generally supported by Investor's Intelligence.  They note gigantic selling climaxes last week which often indicate a bottom is near.  Also, their bell curve of industry strength is almost completely to the left which also indicates a bottom is near.   

A consideration before buying is the fact that the S&P500 is below the 200-day moving average.  Mark Hulbert periodically writes about the Faber-rule which is to generally avoid stocks while the SPX is below this moving average.  I like this rule because you never really know for sure if these corrections are bull market pullbacks, or tipping points for a new bear market.

Not much is working in this market right now if you are long as the remaining areas of strength are being pulled lower.  One area of strength over the last few days is the US Dollar.  This strength is likely the result of unwinding global carry trades, diminishing prospects for the high-yielding currencies tied to the commodities and a flight to safety. 

The chart pattern shows a very nice looking W bottom with a break above short-term resistance.  Of course, there is plenty more resistance overhead so the dollar still has lots to prove.  In the short run, this obviously works against commodities, materials, energy, etc.  A couple tests of the sustaining strength in the dollar will be how it handles the test of the downtrend resistance and whether the RSI can move into overbought territory.

The broader view of the dollar shown in the weekly supports the initial signs of strength shown in the daily.  The dollar is at long-term support and the RSI shows a nice positive divergence in which the RSI has found support above the oversold level.  Of course, the fate of the US Dollar is mostly in the hands of the Fed and the central banks, and how they set rates.

When equity markets started selling off the funds initially flowed into 10Y notes.  Then last week the fund flow dramatically switched to the short-term durations such as T-Bills.  As a result, since the market sell off began there has been a shift lower in all rates.  Over time, the lower rates are helpful to the economy and favorable towards stocks, but in the short-term it is a warning of economic stress.