When to buy after a downtrend?

As technicians, we're not interested in riding downtrending charts on the long side. So, at a minimum, we need to see the configuration of the charts change as follows:

• Price action needs to trend above the 20-day EMA
• The 20-day EMA needs to clear the 50-day SMA

The problem with this approach is that it will NEVER catch a bottom. Prices must reverse for a period of time in order for the technical configuration above to develop.

At the top, we saw money rotate into defensive areas. At the bottom, we'll sometimes see the opposite. Every day and period in the market is different, though - there's never a "one size fits all" type of market bottom.

-Tom Bowley, Chief Market Strategist