By Charles Delvalle
Everyone is pretty excited about the 600-point rally the market witnessed on Wednesday. And some, including Jim Cramer, are calling that a bottom. But is this really the bottom everyone’s been waiting for?
First, you should understand that this rally could have formed a short-term bottom. But even trying to time a short-term bottom is hard work. Just take a look at the chart of the Dow Jones Industrials (INDU) below. In just the past three months, there have been two other times that “could have” formed a bottom.
Both of these two previous points were marked by an oversold RSI and slow stochastic. Not only that, but the market was already trending down in both of these instances.
So why would we have a real bottom now? Is it because of a 600-point rally? The truth is, trying to call this a bottom is nothing more than an educated guess.
My colleague Chris Johnson wrote yesterday about how a real market bottom is made up of heavy selling accompanied by a lot of pessimism. We simply don’t have that right now.
My suggestion is to remain patient and use any big rallies to get into smart short positions.
This post has been edited by Puppies: Jan 26 2008, 08:24 AM
