The Friday's later surge made bulls on my Chinese forum very excited, but I guess it might mean nothing, at least a follow-through Monday is needed.

Three points to say:

1. I still insist "no panic no bottom". In my Chinese forum (which should be the most popular Chinese stock forum in North America. I don't mean to brag here, I just mean that it can represent what most people think), the same argument of "VIX may not spike this time" happened before Jan, March and July bottom last year. Now the same argument rose again, exactly the same reasons for "not spiking this time", the only differences are now the argument came from different IDs.

2. Seldom a bottom is formed by a later day surge, the only exception recently was 11/21/2008, so I'll compare the Friday's later surge with that of 11/21/2008 in today's report.

3. The market is extremely oversold, a rally could happen at any time, so if we do get a follow-through Monday, according to my "equal up and down" rule, the high should be higher than SPX Wednesday's high which was 724, in order to confirm that the Friday was indeed a bottom.

 

7.1.0 NYSE Composite Index Breadth Watch, 11/21/2008 was a very strong day, besides the breadth and the volume differences, most of all, Russell 3000 Dominant Price-Volume Relationships argues a lot: On 11/21, we had 1367 stocks price up on volume up which was the most bullish price-volume relationships, while on Friday, there wasn't any dominant price-volume relationships, the largest number was 796 stocks price up volume down which was the most bearish price-volume relationships.

NYADaily

I have an impression that every time before bottom is formed, there always are some failed intraday reversal attempts until, well, the last one. So let's take a look at how many failed reversal attempts before 11/21/2008. If you have time, read this: 11/21/2008 Market Recap: Is 3rd time the charm?. I didn't correctly call the bottom, the reason was the same "seldom a bottom is formed by a later day surge", but I did, according to "the 3rd time will be different", predict a follow-through and after the follow-through, via "equal up and down" rule, the bottom was confirmed. OK, we may apply the same method nowadays. To me, the Friday's later surge looked like a 2nd reversal attempt, so accordingly, I suspect that if there'll be any follow-through on Monday. And also about "equal up and down" rule, if we do have a follow-through Monday, remember, the high of SPX must be higher than 724. Bellow are 2 charts, the 1st one is around 11/21/2008 where I see at least 3 reversal attempt, while the 2nd one which is now, so far I only see 2 reversal attempts.

SPY15minNov212008 

SPY15min

1.0.3 S&P 500 SPDRs (SPY 30 min), STO has remained under oversold for too long which was rare, plus positive divergence everywhere, so there's a hope that we might see an up Monday. I'm not sure though as statistically, Monday tends to close in red.

SPY30min

1.3.3 Russell 2000 iShares (IWM 15 min), ChiOsc is way too high, period.

IWM15min

Before the end of this report, I'd like to share you a new chart. I've put this in 2.4.3 Breadth Oversold/Overbought Watch.

NYHLCum