This week I outlined a bullish looking chart, the $BPSPX:
Bullish in the sense that the $BPSPX RSI has now reached a rare oversold reading, the kind of reading that has produced at least short term bottoms or more meaningful bottoms.
These are mere examples, but they highlight a common message: There are positives to be found in the charts that suggest there is ample firepower building for a sizable bounce once a bottom confirms itself.
Whether a bottom was made last Friday I can’t say yet. I don’t like bottoms on Fridays. They are rare, most Friday bottoms get retested on a Monday or even pierced to the downside. But they do happen and we will know a lot more on Monday.
But if a low was made it shouldn’t surprise either.
But a rally is coming and whether the next rally will lead to a lower high before a full blown bear market emerges or new highs are still to come, I remain open minded about it. There’s a lot in the charts that suggests that a major top has formed, but from my perch it’s too early to confirm this.
Much now depends on how the month closes and how stocks react into early November and following the mid term elections.
One particular reason I’m staying open minded here is the confluence of the larger signal charts and market history.
Many signal charts are vastly and some even historically oversold. During an October. Why is that potentially very relevant?
You’ve head of October bottoms before.
One famous example of course was 1987 following the crash. Here’s another, 1998:
But hey, that’s just 2 examples you say. Allow me to retort:
October 1957, October 1966, October 1974, October 1987, October 1990, October 2002. All were major bottoms.
That’s a lot of Octobers. Just saying, hence keeping an open mind here. From my perch the real test for markets will come after the next big rally. New highs or bust.