To OTC Journal Members:

 

Have We Seen the Bottom?

Despite all the economic doom and gloom, the NASDAQ surged 15% this week to close at 1961, 342 points above the low set on April 4th. NASDAQ was up four days in a row for the first time since last Labor Day. The Big Debate on Wall Street? Have we finally found the bottom, or is this bounce just a temporary rebound in an ongoing Bear Market?

Stocks seem to be shrugging off continuing waves of bad news and bouncing off extreme lows. PPI numbers were weak yesterday, and consumer sentiment continues its downward spiral. The consumer represents 2/3 of the economy, and the FED is hanging its hat on the consumer spending keeping us out of recession.

Traders were expecting the typical pre April 15th tax day sell off, but it didn't come this year. Usually investors sell at this time to lock in profits and raise cash for tax obligations. The only investors locking in profits to raise cash would be short sellers, and they would have to buy to cover. Perhaps this helps explain the week's performance.
 
 
 

Which Way From Here?

We've been doing a lot of reading and studying on this very subject. We follow one market technician who has been calling this market with some reasonable level of accuracy. He believes this rally will continue to the 2100 NASDAQ range, and the next downward move will follow. He believes another test of the lows is required before we can confirm the Bull is back.

He also believes if this scenario plays out, it will signal the end of the Bear Market and the beginning of the next bull.  We bring you his view because he has called the market relatively accurately over the last six months.
 
 
 

The Case For One More Sell Off

We believe many stocks have gotten cheap enough to provide excellent entry points for investors with a six month time horizon. However, if you believe technology stocks have bottomed, you may be disappointed.

From a technical standpoint, most analysts will tell you the market must retest its lows at least once or twice more before a true bottom can be confirmed.

Furthermore, as stocks rebound, beleaguered investors will welcome the opportunity to take some cash off the table at enhanced values, thereby creating an excess supply at higher levels.

Another factor is the economy. While technology companies are clearly in a deep recession, the economy as a whole is just beginning to show signs of a slow down. If technology drags the rest of the economy into a deep recession, this market might not turn up for some time.
 

Conclusion

While we might not be at the beginning of the next bull market just yet, there were some signs this past week there is hope for the market bottom to be near at hand.

This week Wall Street analysts were talking up the Semi Conductor sector, which hit a low of 453 on April 4th, and has since rebounded to 597. Analysts were beginning to issue buy recommendations on stocks like Intel (NASDAQ: INTC) simply on the basis of the worst case already being priced into the stock. 

This may be true of  many technology stocks. Layoffs and cutbacks set the stage for enhanced profits as demand for technology resurfaces in the future. The next two months could be dicey, but we believe the second half of the year will bring back the Bull.

In the interim, we continue to believe now is a good time to accumulate positions in stocks you like. Prices might never be lower, but it is best to keep some capital on the sidelines to add to positions during market extremes.

We wish we had come out with a couple of Trading Alerts during this four day surge, but we were caught by surprise. If the market retests its lows, look for the OTC Journal to find you a few outstanding trading ideas.

SwingWire.com also has a lucrative incentive model for experienced investors and traders who consistently outperform the market. Share market ideas with other like-minded investors, establish a proven track record, provide insightful commentary, attract followers and ultimately become one of the Internet's highest paid and most sought after CyberAnalysts! 

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