A week ago on 28 Oct 08, the SPI made a low and have had some good up-days since. There are good reasons to believe that the bottom has been reached and the market has turned!
The low last week was only days before the 1 year anniversary from the All Time High (ATH) last year, which was on 1 Nov 07. A year is an important time cycle. Looking at the charts we can also see that the SPI has hit a couple of support levels that also may suggest that the market has turned.
Looking at the last Bull Run from March 03 to Nov 07 we can see that the SPI has retraced 75% of this range, only off by a couple of points. A 75% retracement is a rather significant support/resistance level, especially if the range is between a significant low and a significant top. The range that we are looking at is definitely of great importance!
SPI 07-03 retracement
We can also see that the 50% level was acting as a support level in June 06 as well as for several months earlier this year. From about Jul 08 to early Sep 08 when all the doom and gloom started, the market was going sideways, resting on the 50% support level.
In the chart below I’ve drawn a Gann fan from the significant low on 16 Aug 07. Basically a Gann angle is a line showing relationship between time and price. A 2×1 angle goes down (or up) the price axis by 2 ticks per 1 day. There is of course a lot more theory behind the Gann angles and fans, but that is too much to deal with now.
SPI Gann angles
The chart also shows the trend lines that contained the market since it started its dive down in early Sep 08.
We see that the 2×1 Gann angle has acted as a support level several times this year; in March, July and August. We can also see that the low last week just hit the 4×1 angle before bouncing back up in a rally. This week the SPI also broke out from the downwards trend corridor that it has been in the last two months.
I personally think that the low last week was the bottom for now. However I also think that there are a lot of traders and investors that still act out of panic, so volatility will still be present and care must be taken!