As a follow up to our TrendWatch from yesterday, I wanted to briefly highlight one of the possibilities that may be a stopping point to our current bearish downturn. We've all probably heard the term 'double-bottom'. If not, the concept is simple - the market hates to give up gains that it recently fought to get. Put in more specific terms, investors will start buying at low prices that they may have missed recently. The resulting chart will appear to have hit nearly the same price level on two distinct occasions.
Of course, this example is best illustrated with a graphic example. Twice in February of last year the S&P 500 hit lows around 1075. After the first time, the index bounced slightly higher. As it pulled back, it again found support at 1075 (making the second bottom), and moved considerably higher. Investors saw values that they had missed out on only a few days before, and decided that the time was right to buy (continued below).
This is again becoming a possibility as the S&P approaches levels it hit in mid-February. We saw a low on February 13th of 806.29, and it seems we're headed there again. Will this time yield the same result as last year? It's obviously difficult to say, but don't be surprised if the 806 level is a turbulent one. If we fall firmly under it, then obviously we'll have not made a bottom. But if we do see a couple of firm moves higher once we reach 806, that could be bullish.
Se não receio o erro é porque estou sempre pronto a corrigi-lo
There's no bull side and no bear side. JUST THE RIGHT SIDE!
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