Special Market Alert! Have we seen the bottom?

On Wednesday March 12th the market neared its October lows but extremely significantly DID NOT break through to new LOWS! This is extremely Bullish!

The following table shows the October lows compared to the March lows.

Index October 2002   March 2003
Dow 7197.49  7416.64
NASDAQ  1108.49  1253.22
S&P 500  768.63  788.90
Russell 2000  324.90  343.06
Value-line (Arithmetic)  824.77  910.60
NYSE  4402.44  4418.62

Note that not one of these measures broke below their October lows although the NYSE came very close! 

This is very significant. Even with all the negative news and fears about a WAR with Iraq… the market could not make a new low. This may very well be the bottom of the slide.  

The final confirmation necessary is another 2% up day on strong volume. This may come as early as Monday. A move below previous lows would of course negate the buy signal.

In January when the market failed to rise above the Nov-Dec highs we had a significant indication that the market would test its old lows… and now it has…

But this time 
  we have 
      The market  did not make new lows!
DOW 2001 - 2003

DOW 2001 - 2003

Click Image for larger image

What now?

 It is very possible that the indexes will go back and test their previous highs. 

We can expect a rapid run up with the first resistance at the February plateau of 8000-8076 on the Dow.

If it can break above 8076.02 it will probably rocket to test the January highs of 8869.29

The next test is at the Nov-Dec highs of 9043.37 

Then resistance at the Aug high of 9077.01

The remaining significant points are the May high of 10353.43 and the March peak of 10673.10 and  July 2001 peak at 10679.12

The Key points of resistance on the way to new highs-

Date  High
Feb 2003  8076.02
Jan 2003  8869.29
Nov-Dec 2002  9043.37
Aug 2002  9077.01
May 2002  10353.43
March 2002  10673.10
July 2001  10679.12
May of 2001  11350.05
September 2000  11401.10

Note how each peak was slightly lower than the previous peak.

What we were seeing was the market trying to test the old high and failing. Then it would work its way down to test the old low and succeed (go lower). Then it would work its way up to the previous high and fail go higher. Then it would go on to make a new low, etc., etc.

That is what makes Wednesday’s price action so significant! For the first time since the market top we have seen the market fail to make a new low. How do I know it won’t try again? Of course I can’t say with 100% certainty but with the significant volume on Thursday and Friday it looks like all the sellers have been exhausted and the only people left are buyers! The Dow moved up 3.5% on Thursday!    3.5% in one day!

On that same day the NASDAQ 100 had 100 advances and zero declines! 100 out of 100 is extremely significant in light of all the negative news.

If you look at the market action of last October I am expecting that the current market will look very similar a couple of months from now! If you always wanted to buy at the bottom now is your chance! Mark my words.

Can the market continue up even if we have a war? 

The market has been building pent-up demand, based on an economic recovery that began several months ago. But the fear of war has been holding it back until now.

Now I don’t think even that will keep the demand in check. We could see explosive action to the up side. Usually in times like this we see most of the gains for the year in a few days. Historically we have seen markets zoom even in times of war so it is very possible that this will be one of those times.

We saw 3+% in one day! 

That is more than you can make in a money-market account in a year! There are very few sellers left so the market has no where to go but up. On the announcement of war we may see a brief drop but it will only be another buying opportunity.

Don’t miss the next few days in the market. 

It is always darkest right before the dawn… but those who have the strength to act when all looks darkest are the ones who succeed in the market! 

You have heard it said, “Buy when Blood is running in the streets”.
 This time the opportunity might be slightly before the Blood is actually in the streets. But the principle is the same, It means “Buy when everyone else is gloomy”. The market won’t rise until all the sellers are eliminated. By combining September 11 with an already falling market, then Afghanistan and now Iraq and Korea everyone who could possibly sell has finally been eliminated.  The market has nowhere to go but up. Those who bought at the top and then steadfastly held on eventually losing 60% or more of their money, are now so badly burned  that they will wait until the market makes new highs before entering the market again… Just in time to be burned again! 

Don’t be one of them get in at the bottom!

Timothy McMahon, Editor
Financial Trend Forecaster
The Web’s Premiere Inflation Website


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Work by editor and author, Tim McMahon, has been featured in Bloomberg, CBS News, Wall Street Journal, Christian Science Monitor, Forbes, Washington Post, Drudge Report, The Atlantic, Business Insider, American Thinker, Lew Rockwell, Huffington Post, Rolling Stone, Oakland Press, Free Republic, Education World, Realty Trac, Reason, Coin News, and Council for Economic Education. Connect with Tim on Google+

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