Friday, August 17, 2007

Bear Market Bounce

Many astute traders sensed a near-term capitulation/bottom yesterday.
If we have entered a long-term Bear market in real estate and stocks, such wild retraces/"dead-cat bounces" are par for the course, as this chart from the last Bear market in 1966-1982 reveals:

As the charts don't format to the blogger format well, please go to my main site to view the charts: . They are definitely worth a look.

Note the wild swings down as reality hit the market with heavy splashes of cold water, and equally wild bounces as periods of euphoria/"good news" like today's Fed cut mask the cold reality. Such volatility offers astute traders huge opportunities to make money--hence it behooves us to look for tops and bottoms of such swings in pyschology.

Frequent contributor Harun I. was kind enough to send in a chart of the Dow Jones Industrial Average (DJIA) with Fibonacci numbers and channels. (Note that the full chart was truncated by me to fit the space limitations of this page.)

Note that yesterday the market hit a key Fibonacci number (38.2%) and violated its lower channel. These actions suggested a near-term bottom was likely--not guaranteed, but likely, as no market, Bull or Bear, goes up or down in a straight line.

In this one-year chart, we can see that the DJIA also bounced hard off a key level of support: the 200-day moving average.

Additionally, the stochastic indicator had hit an extreme "oversold" level which generally signals a bounce/turn/retracement.

Thank you, Mary Jo S. ($50), for your extremely generous donation to this humble site. I am greatly honored by your support and readership. All contributors are listed below in acknowledgement of my gratitude.

Terms of Service

All content on this blog is provided by Trewe LLC for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. These terms and conditions of use are subject to change at anytime and without notice.

Our Privacy Policy:

Correspondents' email is strictly confidential. This site does not collect digital data from visitors or distribute cookies. Advertisements served by third-party advertising networks such as Adsense and Investing Channel may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative)
If you have other privacy concerns relating to advertisements, please contact advertisers directly. Websites and blog links on the site's blog roll are posted at my discretion.

Our Commission Policy:

As an Amazon Associate I earn from qualifying purchases. I also earn a commission on purchases of precious metals via BullionVault. I receive no fees or compensation for any other non-advertising links or content posted
on my site.

  © Blogger templates Newspaper III by 2008

Back to TOP