While it is fun to pick at tops and bottoms, that only happens purely by luck. As a technician, it is my job to look for areas on the chart that would be areas where a reversal could be at hand. But if anyone has been watching the stock market of late we know levels are rendered useless when emotions are involved. The stock market is a sea of emotions, fear and greed on a chart.
But what good is calling a bottom anyway? You can stab with a knife at a price at any moment, maybe you’ll be right. But without some evidence supporting it there is just no way of knowing. I will look for some stabilizing after a big price drop, reversal and then confirmation. That way I probably won’t get caught.
Let’s look at last week’s action. Bearish all around, but Thursday was a strong up session. Many thought this was it — good breadth, decent volume and price action all day long. Many were out celebrating the ‘bottom’ after a vicious start to the year. Alas, Friday gave it all back and then some, those spiking the football were suddenly in retreat. The trend proceeded to move down. One more day of confirmation would have been the saving grace.
