In a previous post in this series, I commented about the need to use either fundamental or technical tools (in other words, evidence based reasoning) to determine when the current market has hit bottom, rather than simply paying attention to the uninformed opinions of the media.

This article is an update on this, using my own software, which implements Loess smoothing.  This reveals the real market direction and any turning points.

Loess smoothing is a smoothing approach which has minimal lag, unlike other approaches such as moving averages.  It is useful in analysing stock index time series data because the smoothing can remove the random ups and downs of the market to reveal the longer term trend underneath.

I analysed a time series of data from the ASX 200 (which is our local Australian stock index, equivalent to the S&P 500 or Nikkei indices.  At present, the ASX 200 is taking its lead from the US markets.  

The overall result is that the trend is still downwards.  Despite some recovery days, and a short term upward movement (which I expect to result in a short-lived rally once the result of the US election is clear), there is no evidence yet of the market turning around.

I’ll continue to monitor this and advise when I can see evidence of a recovery.

Tags: loess smoothing, stock market trends, Trends

This entry was posted on Tuesday, November 4th, 2008 at 7:44 am and is filed under Market Commentary. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.