Click to see full sized chart courtesy of stockcharts.com
This chart shows the number of NYSE stocks that are making new 52 week lows (red spikes) plotted with the S&P500 in black. You can see from the chart that spikes above 450 new lows are fairly rare. The chart also shows that buying after these spikes retreat has provided great returns in the short term (2001) and often in the long term (1994, 1998, 2002, 2004 and hopefully now in 2007.)
I believe this chart is more evidence that the market is trying, as odd as it seems near all time highs for the averages, to make a very major bottom similar to the 1998 and 2002/2003 bottoms.
Most really good bottoms before major advances are double or triple bottoms. 1998 was a double bottom and 2002/3 was a triple bottom with two significant lows made in 2002 and a test of those lows, about 4% higher, in 2003.
Also of note is this attempt to make a major bottom is coming on what I call a test of the breakout above the 2000 highs.
The bears will say the market is making a double top before crashing as the market comes apart.
Most really good bottoms before major advances are double or triple bottoms. 1998 was a double bottom and 2002/3 was a triple bottom with two significant lows made in 2002 and a test of those lows, about 4% higher, in 2003.
Also of note is this attempt to make a major bottom is coming on what I call a test of the breakout above the 2000 highs.
The bears will say the market is making a double top before crashing as the market comes apart.