Closing In On The Lows

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Bad news all the way around sent the major indexes on a downward slide yesterday. It was pretty much a continuation from the prior day with weak consumer spending, continued retail worries as well as changes to the $700 billion bailout plan leading the news.

We are now getting close to the October lows, which many technicians watch very closely. If the lows hold (which I doubt), and the market rallies from here, this will constitute a potential double bottom, which is considered to be bullish.

How close are we to the lows from 4 weeks ago? MSN Money featured the following chart:


As you can see, the Nasdaq and the S&P; 500 are closest to their low marks made in October. If these lows are taken out, and there is a good chance, the bottom pickers will have lost again because even lower prices are likely to be on the horizon.

I am repeating myself again by saying that trying to desperately look and call for a bottom in a bear market, especially the one we’re in now, is simply a waste of time, energy and emotions. Bear market trends have to play themselves out to the end, until they reverse. Once that happens, there will be great opportunities to re-enter at which time the odds will be stacked in your favor.

Unfortunately, most investors don’t have the patience to recognize this fact.

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Comments 8

  1. After 45 years of erratic portfolio self-management, I’ve finally learned to take predetermined losses and wait patiently on the sidelines for new opportunities to establish themselves….then move!
    Thanks for your guidance.

  4. Buy and Hold is still alive and well. Been introducing this website to different investors and not interested. Worried about missing the next rally. Hopefully this market does not remove all wealth from the buy and hold investors.

  6. Got off work and its interesting watching all the talking heads on the money news channels telling us the market is safe to reenter after this up day. What news came out to bring about this BOUNCE none that I can see. I feel bad for any person to hard headed to ride this all the way to the bottom. You can not and should not try to out smart the market. It will finish correcting when and only when all the bad news has been absorbed. I beleive there is more bad news coming. Shame on the talking HEADS!!!!

  7. I had previously commented on the double bottom. Before the rally today, the price of SPY dropped below the double bottom, which, would imply that the double bottom was NOT the final bottom.

    Someday there may be a double bottom that will hold, but, most likley, when it comes, there will be no V-shaped move up, but more than likely an L-shaped sideways movement for a long time.

    It’s going to be hard for the markets to rise in this bailout economy. And the government’s solution is to ‘stimulate’ the economy by encouraging more bad loans that can’t be collected.

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