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Some of you may have seen this. The opinion
is that of the author.
Good luck and good trading,
Ray Raffurty
Mirror, mirror, was that a bottom?
by David Nichols, Editor
While everyone was busy wringing hands and bemoaning the relentless onslaught
of sellers, the Nasdaq 100 went off by itself to try to make a bottom.
Without telling anyone!
There's an interesting pattern developing in the Nasdaq 100 (NDX). At
important bottoms -- at least during a bear market -- the NDX tends to retrace
an exact mirror image of the previous decline. We're now seeing another of these
"mirror image foldback" patterns developing right now, which gives more credence
to the case that an important bottom has been seen, provided the NDX can
continue to move with this pattern for a few more days.
(See charts 1, 2 and 3)
Charts of individual stocks look even more convincing that some sort of
intermediate term low has been put in. Interestingly, the stocks having the
biggest initial run here are not necessarily the biggest cap stocks, although
even Cisco has gotten up off the canvas. Here's a sampling of what I was
scanning last night:
(See Charss 4,5,6, and
7)
Now, this could be yet another in a series of head-fakes and seductive bear
market traps. But it looks different this time. Stocks are more burned out, and
the current breakouts are coming with larger candles (more volatility and more
action), and the breakouts have so far have been going for as long as 14 or 15
days. That's longer than any continuous rally for a long time.
So while it's still early, there are at last some encouraging signs for a
rally, besides just a high VIX and VXN. Judging from the mirror image foldback
pattern, there's no need to be a hero -- we can simply wait for a more solid
breakout along this pattern. Most of the upside should come after this breakout
is confirmed anyway.
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