Although we have not yet seen the sort of panic that leads to bottoms like we had in January and March, most of the other conditions are in place for a bounce. Buyers are starting to inch in a bit as oil and commodities continue to correct and financials finally find some support.
So often in the market, traders are sitting on the sidelines waiting for someone else to be the first to commit to a bounce. The short-term momentum buyers have little interest in being the first to jump in -- they just want to hurry up and join the party once it starts. We are starting to see some signs of that now.
The danger in this market is that many of the nascent rallies have been quickly extinguished on a bounce in oil or a further pullback in financials. Trust levels are low, which can cause a rush for the exit if buying dries up. Sooner or later, though, the bulls are going to hold, and that will draw in some of the folks on the sidelines who have been waiting for some strength before they commit.
Rev Shark Blog Watch the Financials for the All-Clear 7/8/2008 11:44 AM EDT The market needs relief from selling, and the improving financial stocks will give the signal.
James "Rev Shark" DePorre is the author of Invest Like a Shark: How a Deaf Guy with No Job and Limited Capital made a Fortune Investing in the Stock Market. He is founder and CEO of Shark Asset Management, an investment management firm, and he also operates sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here.
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