Breakdown of a bear market rally
(trendfund.com):
BREAKDOWN OF A BEAR MARKET RALLY & HOW YOU CAN BENEFIT FROM IT! Posted Wednesday, October 24, 2001, at: 23:52 PM by waxie
OK, so you say we hit bottom after Sept. 11th and the massive selloff,
right?
You say that we are now in a new Bull market, right?
That both indexes will figure out how to make new all-time highs,
its just a matter of TIME, right?
Well, you may be right on one, or all those counts, certainly.
However, my feeling remains that this is just another Bear market
rally.
Why? Well, lets break it down;
1)Bear Markets usually don`t end with massive rallies like this.
Usually the market flatlines for a while and builds a base
and then makes its way higher. There are exceptions, however,
so anything is possible.
2) BUT, for those that think this is the real RALLY and start of
a new Bull market, I suggest you go look at charts from
April to see if something looks familiar. We can also look
at all the rallies over the last 1 1/2 years for clues about this
latest rally.
Remember, the same pundits who predicted the bottom have called
that same bottom for 1 1/2 years EVERY TIME the market rallies.
Not once, not twice, not 100 times!!! EVERY TIME!
And, up until now, they have been wrong - EVERY TIME!!!
Will they be this time? Remains to be seen. I say YES, they will,
but the great thing about trading is that it don`t matter. I hope
I`m wrong, as I always state, so that we can rally to new highs
and trade for much larger point swings!!its much easier that way!
So, how does a Bear Market rally usuall work?
Well, here are the stages of most Bear Market rallies that I have
tracked -
Stage #1)
Selloff after a series of strong declines. The selloff comes on
much heavier than normal volume over the course of that time
frame. We saw that when Dow went to 7800 which was the near term
bottom that WE called!!!
Same thing on Nasdaq, stocks were getting dumped left and right
as fear ran rampant.
FEAR usually marks near term (and long term) bottoms!
So, after the panic selling, the market then starts a strong upward
move on heavy volume.
The first wave of buying is usually in Blue Chips (IBM, MSFT, CSCO,
etc, etc, etc.)
These stocks will bounce hard and for nice % moves.
The 2nd wave of buying comes in the 2nd tier stocks;
ISIL
BRCM
PMCS
JNPR
etc,etc,etc,etc. Long list!
Those stocks take off and generally double or triple over the span
of 2 - 4 weeks (see April for this as well!)
The 3rd wave of buying comes in the 3rd tier, or garbage can stocks.
This buying is VERY close to the top since even the drek is now
being bought.This is what Greenie called - Irration Exuberance.
The final wave of buying usually comes,like its capitulation
alter-ego, on LARGE volume. Instead of "Blowoff" selling, you get
"Blowoff buying"
A feeding frenzy as desperate funds and desperate institutions
have to jump back in with both feet at whatever price they have to.
They must get in or risk looking bad, so they do just that.
That`s usally the near term TOP on the market because once the panic
buying steps in, there is no money left to buy and the shorts
then come back in and take us down.
Of course, it is always possible that a new Bull Market will, or had
started, but history usually turns out right and that would dictate
that when we get that blowoff buying, thats very close to the top.
How can you benefit? Look for laggards and cheap stocks
that used to be safe and now aren`t. WE sent an alert
to members earlier today on possible sector to play.
Play on, babies, play on!!! Thanks and RULE THE FREAKIN` MARKETS!!!
WAXIE
· Waxie`s thoughts
(trendfund.com):
BREAKDOWN OF A BEAR MARKET RALLY & HOW YOU CAN BENEFIT FROM IT! Posted Wednesday, October 24, 2001, at: 23:52 PM by waxie
OK, so you say we hit bottom after Sept. 11th and the massive selloff,
right?
You say that we are now in a new Bull market, right?
That both indexes will figure out how to make new all-time highs,
its just a matter of TIME, right?
Well, you may be right on one, or all those counts, certainly.
However, my feeling remains that this is just another Bear market
rally.
Why? Well, lets break it down;
1)Bear Markets usually don`t end with massive rallies like this.
Usually the market flatlines for a while and builds a base
and then makes its way higher. There are exceptions, however,
so anything is possible.
2) BUT, for those that think this is the real RALLY and start of
a new Bull market, I suggest you go look at charts from
April to see if something looks familiar. We can also look
at all the rallies over the last 1 1/2 years for clues about this
latest rally.
Remember, the same pundits who predicted the bottom have called
that same bottom for 1 1/2 years EVERY TIME the market rallies.
Not once, not twice, not 100 times!!! EVERY TIME!
And, up until now, they have been wrong - EVERY TIME!!!
Will they be this time? Remains to be seen. I say YES, they will,
but the great thing about trading is that it don`t matter. I hope
I`m wrong, as I always state, so that we can rally to new highs
and trade for much larger point swings!!its much easier that way!
So, how does a Bear Market rally usuall work?
Well, here are the stages of most Bear Market rallies that I have
tracked -
Stage #1)
Selloff after a series of strong declines. The selloff comes on
much heavier than normal volume over the course of that time
frame. We saw that when Dow went to 7800 which was the near term
bottom that WE called!!!
Same thing on Nasdaq, stocks were getting dumped left and right
as fear ran rampant.
FEAR usually marks near term (and long term) bottoms!
So, after the panic selling, the market then starts a strong upward
move on heavy volume.
The first wave of buying is usually in Blue Chips (IBM, MSFT, CSCO,
etc, etc, etc.)
These stocks will bounce hard and for nice % moves.
The 2nd wave of buying comes in the 2nd tier stocks;
ISIL
BRCM
PMCS
JNPR
etc,etc,etc,etc. Long list!
Those stocks take off and generally double or triple over the span
of 2 - 4 weeks (see April for this as well!)
The 3rd wave of buying comes in the 3rd tier, or garbage can stocks.
This buying is VERY close to the top since even the drek is now
being bought.This is what Greenie called - Irration Exuberance.
The final wave of buying usually comes,like its capitulation
alter-ego, on LARGE volume. Instead of "Blowoff" selling, you get
"Blowoff buying"
A feeding frenzy as desperate funds and desperate institutions
have to jump back in with both feet at whatever price they have to.
They must get in or risk looking bad, so they do just that.
That`s usally the near term TOP on the market because once the panic
buying steps in, there is no money left to buy and the shorts
then come back in and take us down.
Of course, it is always possible that a new Bull Market will, or had
started, but history usually turns out right and that would dictate
that when we get that blowoff buying, thats very close to the top.
How can you benefit? Look for laggards and cheap stocks
that used to be safe and now aren`t. WE sent an alert
to members earlier today on possible sector to play.
Play on, babies, play on!!! Thanks and RULE THE FREAKIN` MARKETS!!!
WAXIE
· Waxie`s thoughts
