The level of media noise about the market almost demands some extended commentary on recent action.

I don’t trade by them, but I do pay attention to breadth charts and sentiment measures for the U.S. stock markets. You can find an explanation of my Watchlist here, and you can visit the chart site directly here. My reading of the breadth charts has been, and continues to be, that the lows of January represent an intermediate-to-long-term bottom. I’ve mentioned this several times in the last couple of months:

January 19th:

Technically we are very much oversold on a variety of breadth measurements, all of which are at levels suggestive of long-term, or at the very least, intermediate-term, bottoms.

January 22nd:

My opinion is that the market reached a trade-able capitulation bottom this morning.

January 27th:

As mentioned earlier in the week, I believe a trade-able capitulation bottom has been reached.

February 2nd:

Right now, my intuition is that both of our Timing models are wrong - and that the bottom has been reached and a multi-month rally is on.

February wasn’t a rally, it was a bounce, a possibility I acknowledged on February 6th:

Historically speaking - some bottoms retest, and some don’t. Some bottoms have big options cues, and some don’t. Everybody’s gotta pick their poison, and realize that whether they’re wrong or right THIS time, they’ll be wrong a lot OVER time - and bet accordingly.

Currently the S&P 500 is trading at about the same levels, give or take a percent or two, as it did during the January lows. Time will tell if the area roughly marked by the January lows holds as a bottom or not. I am not a believer in razor-thin support and resistance lines; I’m a believer in somewhat wide, general support and resistance levels, and I’m also a believer that circumstances can change sentiment, so I’m not one to go back 10 years looking for support lines – hell, half the participants from 10 years ago aren’t playing anymore! IF I were inclined to make a bet on it, I would bet the bottom is very close, price-wise; however, I’m trading mechanical systems, which allows me to view that betting option with rather a sense of detachment.

Speaking of mechanical systems …

Timing: No trigger with today’s action. From an index options standpoint, it’s as if we’re out of adrenaline. The sky would really have to be falling (VIX 45+) for the Fear/Greed to signal a “buy,” or we’d have to have several consecutive weeks of lower volatility to work off some of this condition. Similarly, we’d have to trade 1425+ for a few weeks to work the EZ Trend back to a “buy” condition. This strategy has been 25% stock, 25% bonds, and 50% cash since January 18th.