Double Bottom?

The million dollar question seems to be whether this market has formed a double-bottom. This chart would suggest that maybe it has - if even for the short-term. SPY is once again range bound between 130 and 135 though not likely to be bound for long. The resistance in the 135-137 area is significance. Similarly, there doesn't seem to be a lack of buying interest when the market tests it's recent lows. All breakouts lately seem to be to the downside but are always met with large up days. Volume is slightly more significant during down days for what's it's worth.

Ultimately, there are more reasons for this market to go down than up - from the value of the dollar, to jobless claims, to record foreclosures and falling home prices. And of course the Fed lowering rates to a level that got us into some of this mess to begin with - although banks and lenders are acting a little more responsible this time around. It may take another piece of bad news as a catalyst to send the market lower - or at least, no more Fed announcements that artificially drive the market upward.

For the bullish case, the market may have found some support (maybe temporary, maybe permanent). Much of the fear surrounding the financial sector has been relieved and the veil of uncertainty has been lifted - in other words, the still ugly conditions involving write downs, horrendous YOY earnings, etc. have likely come to the surface and been priced into current prices.

So the question becomes, HAS the market already priced all bad news into current market price? I think there should be some more downside but it doesn't matter what I think. If enough people think the worst is over and start 'value' investing then this market could go up - slowly - as no one can admit that the outlook and future growth of most companies look great.

One last point. A lot of people thought they were 'value' investing when BSC, for example, was down to 101...and again at 70...then at 30...and somehow at 2. Very few people have been successful at picking market bottoms but that doesn't stop them from trying (albeit BSC is an unusual example). Fear drives these investors - fear that they will miss out on the next big rally. So, if you're a short-term investor please be careful if you have recently changed your tune from bearish to bullish.