This should be self evident. Starting with 1990 at the bottom, each band of the chart page is a 5 year graph of the SPX with 200 Day, 2&3 Stdev Bollinger Bands.
Because the Bollinger Bands are essentially moving sideways and because the August low was 3 standard deviations below the 200 day moving average it is NOT POSSIBLE to get a successful price test of the Aug Lows which will also be above the lower 2 Stdev Bollinger Band. So far all the recent reversals have occurred between the lower 2 and 3 Stdev Bollinger Bands. There is NO WAY to construe this as bullish.
This means that the Bollinger Bands are going to expand and the 200 day average will have to decline in order to bring the lower BB down to the level of the August lows.
The most likely way this will occur would be with another 10-25% waterfall decline, followed by a bounce, then another decline to a lower low which STAYS INSIDE the lower BB which will be expanding. See Oct-08 to March-08 for an example.
Lasting reversals to not occur from lows closing below the 2 Stdev Bollinger Band
Spikes below the 200 Day Bollinger Band are short term trading opportunities only.
To form a lasting reversal the retest should be above the 200-2Stdev BB
This is NOT what we are seeing in September 2011 - The reversals are
occurring between the 2 and 3 Stdev Bollinger Bands - This is still Crash territory.
Click to enlarge
With 5 Year (250 week) 2&3 Stdev Bollinger Bands
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With 20 day, 2 and 3 Stdev Bollinger Bands
Also 200 day, 2 and 3 Stdev Bollinger Bands
Click to Enlarge
