- Penny Sleuth - http://pennysleuth.com -

How to Spot a Market Bottom

Posted By David Grandey On March 16, 2009 @ 1:11 pm In Featured,Technical Analysis | No Comments

Typically, a market can only bottom two ways. The first is a double bottom pattern. There are a couple variations to this pattern:

1. A double bottom with a shake out low.
2. A First Thrust Up

In order to give you a clue as to what these look like and what to be on the lookout for, below are a few examples in multiple time frames and frequencies. First up are the market lows of last week in a four-to-six day, one-minute time frequency.

The chart above is super historical! It’s the Great Depression lows. As you can see, the crash of 1929 was not the problem. It was the ensuing bear market that followed — that was where the real wealth destruction took place. Sound familiar? What you’ll really notice was that the market did not truly bottom until it formed a 1ST Thrust Up, then an eight-month Pullback Off Highs (POH)! Now let’s fast forward to the bear market of 2000…

The chart above is also historical. It’s a bear market we’ve all lived through — the Tech Bubble Bear Market of 2000- 2003. Look familiar? Again, you did not get your true lows until you got the First Thrust Up, then the Pullback Off Highs (POH). As you can see, this particular POH lasted four months. (Note: The crash of 1987 also showed this pattern.)

Now that you’ve seen a few key historical market bottoms and what the technicals look like, you’ll never have to listen to the talking heads on TV telling you what they think.

With this said, a retest of the lows by the market in the coming week will set up a boatload of issues on the longside and our final lows of the first leg down of this monster bear market. Then we get a reprieve of a decent time duration and a bear market rally.

David Grandey
AllAboutTrends.net [1]

March 16, 2009

Article printed from Penny Sleuth: http://pennysleuth.com

URL to article: http://pennysleuth.com/how-to-spot-a-market-bottom/

URLs in this post:

[1] AllAboutTrends.net: http://www.allabouttrends.net/

[2] Trammel Crow: Lessons in Real Estate Investing: http://pennysleuth.com/trammel-crow-lessons-in-real-estate-investing/

[3] Did You Buy the Market Bottom?: http://pennysleuth.com/did-you-buy-the-market-bottom/

[4] Biotech Rally Just Beginning: http://pennysleuth.com/biotech-rally-just-beginning/

[5] Conglomerate Stocks: The Great Depression Success of American Home Products: http://pennysleuth.com/conglomerate-stocks-the-great-depression-success-of-american-home-products/

[6] Depression Then and Now: Three Eye-Opening Charts: http://pennysleuth.com/depression-then-and-now-three-eye-opening-charts/

Copyright © 2009 Penny Sleuth. All rights reserved.