How the Nasdaq COULD bounce: Look at Oct 25-6 and 12-13, May 10-11 and 23-4, April 14-17 (also a Friday and Monday with a weekend of building terror in between) and 3-4... You could go back further, of course, say to August and October 1998, Jan 9-12 '98 (yet another weekend), or Oct 27-8 '97. Such moves are highly tradable when they arise, but require a strong stomach and (look at August and October '98 for warnings) are probably best left alone unless they set up just right. Oct 12-13 and Apr 14-17 were perfect models: A few well-selected trades on just those days could have made for a nice year's work. Thursday also offered a tradable but very dangerous version of the same pattern in many individual stocks. Reasons to stay in after any quick pop need to be carefully considered.
I hasten to add that none of this is meant to imply anything about the actual health or longer-term technical condition of the major indices and their components. Still, if a bounce comes prior to substantial further slippage, technical analysts and their fellow travelers may quickly rush in to pronounce the latest "re-test" successful - amidst massive, instantaneous revision of prevailing sentiment regarding proper discounting of political (non-)events, prospective Fed action, earnings reports and guidances, and so on. Unfortunately for longs, there's not much of a safety margin here, but stranger things have happened - seemingly just about every other week, come to think of it. |
