$SPX June bottom test. Up now or 40pts lower to weekly 200ma.

Many people are wondering when the bottom will be in. Twitter pundits offer various reasons for a short-term rally. While those reasons may be logical and tradeable under normal circumstances, the market has yet to give us any confidence that a near-term bottom is in.

Interestingly (or alarmingly) SPX made a bullish reversal open today, only to form a bearish engulfing candle. Though remember, outside candles only trigger more selling if the low is broken, so that remains to be seem tomorrow. This chart presents a unique view of SPX using Heikin Ashi candles. White arrows mark turning points that correspond with RSI(14) dipping below 30. In the bottom pane I have included MMTH, a market breadth indicator. If you look back further on a weekly chart, MMTH normally is reliable for a turning point in markets.

While I would like to give weight to the bullish reversal today and think that markets will rally again in the next few days, I am using extra caution in my trade planning. Unfortunately, it seems this time around is not the "normal" that most traders are used to. Do not become biased by posts about historical matches and repeat patterns.

Comment:

MMTH is back over 20 and SPX shows a Heikin Ashi doji candle. This is a nice indication of at least a short term bottom if SPX makes a green candle tomorrow. Normally these dips on MMTH are "once and done," meaning the bottom is in.
This has me wondering if markets will still drop big in October. Then again, this market correction is more than just a quick economic downturn so we must stay open to possibilities.

Comment:

Looking at monthly chart, when we really have a recession the typical reversal points are irrelevant. In 2008 NYSE stocks spent 6 months with MMTH below 15, meaning for half a year as the stock market bottomed less than 15% of stocks were above their 200ma.