May

12

2004

Has a Bottom Been Found?

The market continued its downward spiral heading into lunch today with no end to the selling in sight. That is until an impressive and surprising end of the day rally that saw the Dow reverse nearly 200 points with increasing buying volume. In fact, all of the major indices staged major reversals off their lows on greater volume than the day before. Why is this significant? Major reversal days like we saw today can often be seen at the bottom of corrections. However, we are by no means out of the woods. It’s a step in the right direction towards another rally in the market, but what needs to happen from here is a confirmation in the next few days by seeing another big up day with heavy buying volume. A confirmation day would be a signal that institutions are again in the buying mood and an indication to you to watch the action of leading stocks as they break out of sound bases (read more about sound bases in the tutorial at my website for self investors, SelfInvestors.com). A slew of successful breakouts following a confirmation of a new rally would provide further indication that the rally is for real and that the institutions are once again hungry for new purchases. It will be interesting to see how this will play out. Be patient, create those watch lists and stay tuned! (click the chart for a larger image)

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