How I Learned To Stop Worrying
At the end of the movie Dr.
Strangelove, Major King Kong straddles a nuclear bomb as it plunges down to destroy its
target in the old Soviet Union. The movie ends with what appears to be a nuclear
holocaust that destroys civilization as we know it. Now that’s what I call
comedy.
Over the past four months, the market had many
traders convinced that the world was about to come to an end–several times.
But each time, the market miraculously comes back to life in the final reel.
 The following excerpt from Dave Landry’s
Friday piece pretty much sums up what traders are experiencing:
On Thursday, the Nasdaq sold off for most of
the morning. As it threatened to take out the bottom of its recent range, I
received several phone calls from heavily short traders explaining to me that
it was the end of the world. Then, the market reversed and grinded higher for
what turned out to be a nice trend day. This action had it closing on its high.
So even though the following chart of Yahoo
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made me think of that climactic scene from Dr. Strangelove, I have to
constantly remind myself that anything’s possible.
Yahoo dropped below this long-term trendline support on an
analyst downgrade. I have learned from past experience to take breakdowns such
as these seriously.
A review of my historical charts reminds me that similar
breakdowns below long-term trendline support initiated severe sell-offs in
Microsoft
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PowerRating) over the past few months. Is the
same fate awaiting Yahoo? I would not come close to assuming this until I see
Yahoo close under this long-term trendline for a few days.
Have a great weekend,
Eddie