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Wednesday, July 12, 2006 12:37:04 PM
Volatility means trading opportunities.
That's what I take away from the previous article.
It's possible that the SOX did not reach its ultimate trading low in October 2002 but if that's true then the entire market is headed much, much, much lower. I don't think that is actually true.
The bottom line is simple. Even before the bubble stocks in this sector were extremely volatile. The unusual period of trading was in 1999. Too many people believe that the gains seen from 1996 to early 2000 will be repeated. How likely is that? Prior to the top in 2000 there was a lot of volatility except in 1999.
Bubble like gains will be found but it will probably be in some other sector of the market rather than in these stocks.
That does not mean there won't be excellent trading opportunities. I think we are headed towards a great buying opportunity now.
Short interest was growing in the sector.
Part of the upswing yesterday had to be some of that unwinding. But it will likely be even higher short interest at the ultimate bottom.
Time will tell but unless I am totally wrong in a few months we could find enough of a dip here where stocks can be bought and held for a year or more for some terrific percentage gains.
After that... well more volatility. Take a look at the chart. Be sure to log into StockCharts.com on this window first to see this weekly chart all the way back ten years. Have we hit an RSI(14) of 30 on the chart like at past long term market bottoms?
We have not hit an RSI of 30 yet, maybe we won't, but the SOX could hit an RSI of 30 more than once before an ultimate bottom is formed.
RtS
That's what I take away from the previous article.
It's possible that the SOX did not reach its ultimate trading low in October 2002 but if that's true then the entire market is headed much, much, much lower. I don't think that is actually true.
The bottom line is simple. Even before the bubble stocks in this sector were extremely volatile. The unusual period of trading was in 1999. Too many people believe that the gains seen from 1996 to early 2000 will be repeated. How likely is that? Prior to the top in 2000 there was a lot of volatility except in 1999.
Bubble like gains will be found but it will probably be in some other sector of the market rather than in these stocks.
That does not mean there won't be excellent trading opportunities. I think we are headed towards a great buying opportunity now.
Short interest was growing in the sector.
Part of the upswing yesterday had to be some of that unwinding. But it will likely be even higher short interest at the ultimate bottom.
Time will tell but unless I am totally wrong in a few months we could find enough of a dip here where stocks can be bought and held for a year or more for some terrific percentage gains.
After that... well more volatility. Take a look at the chart. Be sure to log into StockCharts.com on this window first to see this weekly chart all the way back ten years. Have we hit an RSI(14) of 30 on the chart like at past long term market bottoms?
We have not hit an RSI of 30 yet, maybe we won't, but the SOX could hit an RSI of 30 more than once before an ultimate bottom is formed.
RtS
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