The 10 DMA data shows positive crossovers for both breadth and volume. The MCO has reached the over bought territory and is also showing strength. There was a significant divergence into the low indicating people have been buying this dip. Lets look at some similar setups to see what happened.
Last summer we had a similar setup at the 200 SMA that led to a sharp bounce after one last down move.
That rally eventually failed and we went to lower lows. Here is another chart.
This chart was from 2005, and also made a nice bounce after one last pullback. This low was not broken for a long time.
This one is from 2004. In this instance there was not much of a pullback before going higher. The rally did not last all that long before the low was broken.
Breadth would seem to be indicating relatively good odds of a bounce higher from here over the next couple of weeks. In two of the three instances above, the market was lower a few weeks later so this is not an indication of a long term bottom.
Bob
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