Tuesday, March 09, 2010

Cyclical Bull Market within Secular Bear Market

The tech bubble at the turn of the century led to a secular bear market. Within the secular bear, we enjoyed a cyclical bull market from 2003 thru2007, followed by a fresh round of selling in 2008. Today is the one year anniversary of the so-called bear market bottom and as we can see from the NASDAQ monthly chart above, we are approaching a test of the secular bear's trendline. Until that trendline is broken for good, we are in a cyclical bull market within a secular bear.

4 comments:

DW said...

hi Jim,

Thanks for your last reply.

Could you please give me some suggestion about my SNDK trade on Wednesday? I long the breakout of $34.70 at the third 15min bar and stop out at 34.45. The first WRB and the second NRIB looked good. The stock lose momentum after BO and reverse.This kind of situation is common to me recently. How can I improve my gapper trade?

Best wishes
Dongbo

Jamie said...

Hi DW,

A couple suggestions on the SNDK trade:

1. Both daily pivot R2 (34.78) and weekly pivot point R1 (34.76) were acting as resistance.
2. 5 period EMA too far below price at point of entry. The opening range was extremely wide, so price needs more time to consolidate the move before breaking higher.

Jim said...

Hi DW,

In addition to Jamie's comments, do the following:
1) Read Jamie's "Swing Trader" post. It is very helpful in putting Wed's action into context.
2) Compare the volume on 3/1/10 (the base BO day) to the day you traded 3/10/10.
The BIG volume BO day had strong follow through intraday. SNDK has broken out and is in an uptrend. However, Wed was not a BIG volume trend day and the early overbought condition was corrected through consolidation the remainder of the day.
There are a lot of false breakouts these days. You really need a good daily chart setup (base BO) and BIG volume to have high confidence in a trend day. Hope these comments help.

DW said...

Dear Jamie and Jim,

Thanks a lot for your suggestion. They are very helpful.

Best wishes
Dongbo