Thursday, May 25, 2006

Finally, the Bounce

Well, that was predictable.

The bounce that everyone's been waiting for finally arrived. The Dow was up nearly 100 points, and there were bounces pretty much across the entire spectrum, including energy. The S&P 500 graph below (intraday) shows how the market was finally able to get some real strength.

The horizontal lines represent Fibonacci retracement levels as measured from the early May highs to yesterday's lows.

If you look at the intraday graphs of the $INDU, $SPX, and $NDX, you can see fairly clearly where they "should" pause. I put should in quotes simply because markets don't always obey technical analysis, and there's no doubt I've been wrong before. If they do (a) pause there (b) reverse (c) take out the recent lows, then we'll have an honest to goodness bear market on our hands. And it'll be about time.

I'm going to keep this brief today, but I'll offer one nice looking chart to you for consideration of a short sale - CRR, Carbo Ceramics. A retracement anywhere close to $50 probably represents a nice low-risk/high-reward trade.


Hurricane5 said...

The ^DJI is over 11,200 and Tim is saying if it fails to go higher then we are in a bear market. Let me talk some sense into everyone. The ^DJI MUST, and I mean MUST fall BELOW 10,000 or we are NOT in a bear market. Yes, you hear me correctly. The ^DJI MUST fall another 1,211 points for the bears to have ANY hope. Until then, continue loading up on GOOG, EBAY, ZOLT, NTRI, and HANS. Have a great day!

John Wheatcroft said...

I really don't see a "bounce". What I see is that in 4 out of the last 5 days the INDU close higher than the open. It traded in a narrow range for 4 days before yesterday and yesterday it broke out of its narrow trading range.

PB said...

hurricane5 must be getting some free crack when he buys the above names, 'cause any other 'rational' person would not want to touch these names on the long side. Anyways, I think Tim also said that the market needs to take out recent lows (ie. OCT '05) to have a decent bear market.

Super Bull said...

This relief rally is of poor quality. First there is diminishing volume. Second, speculative names like TIE and HANS are still leading the market. That is not a good sign. I reentered my shorts today (GOOG, NTAP, AMZN).