Is This "The" Bottom Or A Tradable Bottom In Equities?

We have heard a chorus of bottom callers recently. The bottom or a tradable bottom is in. Heard that one before? How about every other week for all of 2008. Let's look at a graphic above. The chart is of the S&P since July overlaid with an algorithm that allows me to measure the participation rate of large buyers and sellers in the market. When the algorithm is above the zero line, as defined by the upward blue arrow, buyers are in control. The participation of large and sustained buyers is measured by the intensity of the red graphic. The same is said below the horizontal zero line as defined by the downward blue arrow.

We see that in July and August, large buyers were out in force with sustainable buying. Then, at the end of August, sellers began overwhelming buyers. September and October was defined by one of the largest crashes in U.S. equity history. It was also the largest global equity crash in history, wiping tens of trillions out of the global financial system.

Interspersed on the chart were three short bursts of buyers in October, November and then again in late November into the first few days of December. These are more than likely technical rebounds that can be defined by derivatives expirations week. Counter trend moves during these weeks are quite normal as we have talked about before. When the market has run away with a large move, markets sometimes see violent counter trend moves into expiration week. Especially in this environment where options hedging meant to protect holders of equities in a declining market has ironically likely contributed to the collapse in equity markets.

Focusing in on the box on the right hand side of the graphic, we see buyers and sellers represented over the last two weeks. Not only have we seen nothing more than price slop, except for a few days action in late November, but we see a lack of sustained buying or selling. While this condition has the potential to plant the seeds of an eventual rally, was the late November low "the" tradable bottom or absolute bottom? Regardless of what the opinionators believe, to date, the data looks highly dubious. More on that in a post I'll get up before Christmas.