Found The Bottom?

The Dow rebounded off its critical monthly 200MA (which I mentioned in yesterday's post) today in a HISTORICAL 936 points rally. If you add the rebound off last Friday's bottom, the Dow would have accumulated a gain of over 1000 points in just 2 days!

What caused this rally? Well, the US is not alone in this rally as markets all over the world gained as much as over 10% before the US market opened due to decisive moves made by central banks especially in Europe. I must say that the Europeans are a lot more decisive in executing their rescue plans (Germans especially).

So, is this the time to celebrate and start buying like a nut?

Not just yet.

Remember, a market that can go up 900 points can as easily go down 900 points (the reverse is true and we witnessed it today after the 2400 points beat down last week). This is what volatile markets are all about. With a crisis this big, we cannot expect the Dow to do a V-shape reversal and then start a bull trend right away. It is probably going to do a dead cat rally of some sort since the Dow is this incredibly oversold and then retreat, or even retreat right away tomorrow. Either way, the main thing to look out for is the quality of that retreat. If the retreat is benigh and does not reach for new lows, then a bottom could have been found.

From tomorrow onwards, I will focus on looking for technical signs of a bottom and will title the series "Signs of the Bottom". Stay tuned.