Bottoms Up
There’s your
follow-through.
The Naz’s price/volume action of the
past seven sessions is the exact type of behavior you want to see as an index
reaches low and then springs back up.
The exact type of behavior in terms of
price range, price close, price gaps, volume.
Even fundamentally, things have
changed over the past several outings.
For example, we know news is not as important as the
reaction to the news.
Earlier this week, warnings from
people like LSI
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LSI |
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ALTR |
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of the past weeks.
Thursday’s afterhours reaction to Intel’s
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warning extended this loudly.
Bad news is now good news.
This certainly does not mean there is
a bottom, and that the bear is over.
In theory, that will not be known
until the March 10 peak of 5132 is scaled, which obviously will take months.
True, sentiment is not "if-you-bring-up-stocks-again-I’m-going-to-ask-you-to-leave-the-party"
bearish, the type that has normally coincided with major bottoms.
But your job, as a specialist in the
medium term, is to understand that the market itself is where the rubber meets
the road.
This means the price/volume action of
the Index and the leaders take precedent over all else.
And even though nothing much has
completely set up yet, the tape of the past seven days has exposed the nascent
leadership quite nicely.
A week or two back, I had mentioned
that deep beneath the surface of the popular averages and headlines and noize, the next crop of leaders was
preening, primping, beginning to assert themselves.
Then, it was too premature to tell
which names were emerging first from the chop.
But, at the time, certain buy-side players with deep
pockets were beginning to make the decisions that before too long would make
themselves evident on the tape.
You should now clearly be noticing
right-side cup construction in certain names.
These are your early leaders.
Like
Fuelcell
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Nokia
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Tellabs
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Ciena
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Check Point
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Brocade
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Understanding the process of how
early leadership becomes that way is a skill that is not terribly difficult to
understand or figure out.
But it is a skill that is understood
by less than 1% of all investors.
The reason: The huge majority of
investors believe that investing is about trying to outsmart the market.
Successful medium-term traders
understand that that is a great way to have your head handed to you.
For you newer traders, train yourself
to tune all of the noize out.
Once a brand new bull market begins,
this course of action will pay off in spades.