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Hints of a bottom continue to accumulate

This is another installment of our weekly market update where we look at the state of the market and try to divine where stocks might be headed.

Last week we opined that the technicals of the market suggested a bottom was imminent as we were getting very close to the extremes that in past downturns signaled a rally. The market cooperated somewhat by breaking its six week losing streak. Read on to see how this call is working out...

The view from Alert HQ -- 

For those readers who are new to TradeRadar or who don't remember what this is all about, the data for the following charts is generated from our weekly Alert HQ process. We scan roughly 6200 stocks and ETFs each weekend and gather the statistics presented below.

In this first chart below we count the number of stocks above various exponential moving averages and count the number of moving average crossovers, as well. We then plot the results against a chart of the SPDR S&P 500 ETF (SPY).




With SPY just barely turning in a gain this week, the number of stocks above their 50-day EMA stopped dropping. The number of stocks whose 20-day EMA is above their 50-day EMA, however, dropped a little further. Last week I said we could expect to see a bit of further weakness as well as some choppiness before this downturn resolved itself. So far, there is nothing that negates that outlook.Things continue to look "bottomish".

The next chart provides our trending analysis. It looks at the number of stocks in strong up-trends or down-trends based on Aroon analysis.


This chart also reinforces the expectation of a bottom. The count of stocks in up-trends has stopped falling and the count of stocks in down-trends has  stopped rising.

As I mentioned last week, the turn-around will likely take weeks. And that assumes that Europe (and the rest of the global financial system) doesn't fall into disarray over a Greek default.

A few other observations --

There are many contrarians who take the position that when the ProShares inverse ETFs are leading the market, it signals a bottom. That is certainly the case today. Take a look at our ETF Scorecard based on daily data. The top 28 positions are taken by 2X inverse ETFs, 3x inverse ETFs and short ETFs.

Another interesting development at Alert HQ this week is shown in the Swing Signals list. This weekend we have 86 stocks on the list, easily two or three times the usual number and every single one is a BUY signal. That almost never happens so, to me, it seems to suggest there is a hint of bullishness creeping into the market. Not a lot, just a hint.

Conclusion --

So far there is nothing that suggests we are not in the process of painfully carving out a bottom.

Yet event risk remains strong. All eyes are on Greece and whether the European Union can muster a consensus to follow through on a bailout.A Greek default and all bets are off, including my expectation of a bottom.

Disclosure: none

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