More on this slow selling concept: help it.
Chris Schumacher
MARKET
9/18/01 8:40 AM ET
CPI data comes in line with no real reaction. Today I am looking for something that is not this slow painful selling. The emails that I received on this mainly had the theme asking if slow selling meant that we had more selling to come, that we can go lower.
The answer is that the market moves by certain principles. These principles have been around for centuries, and have been brough more to light in the past 100 years by friends like Jesse Livermore and others that know what the true meaning of "tape reading" is.
The principle of slow selling says that there is a higher probability that the trend continues, rather than reverses. Capitulation phases show that there is a higher probability that a bottom is in place and a reversal is more likely as the selling has become exhausted.
We saw this faster selling back in April and it gave a tradeable rally. Then we continued our slow selling. Nasdaq 4,000, 3,000, 2,000 ,etc. There was never panic. We had small waves of tradeable rallies, but never anything was a consistent uptrend reversal. Panic, while ugly and scary, is what will help to mark the true market bottom.
Yesterday was ugly, being down 700 points on the Dow. But I would certainly be more happy to be down 700 points on panic because we now have a higher probability for a bottom to be in place. Being down 700 on slow selling just means that the public hasn't gone into action yet, and we could very easily see more downside because of it.
This understanding does not come from me being profit oriented, it's just an observation of being a detached observer of the tape. Panic yesterday, while maybe ugly, would have been solid to put us into a bottom with higher confidence. This is definitely what we all want ... a final bottom. But I have to trust the tape as it's how the market speaks to us. |
