Technical Analysis
Wait for the Trend to Confirm Your Call
 By Joshua Hayes
RealMoney.com Contributor
3/19/2008 3:38 PM EDT
URL: http://www.thestreet.com/p/rmoney/technicalanalysis/10408577.html

It sure has been fun watching the action, while being mostly on the sidelines, with about 25% long, 25% short, and 50% cash, and I have to admit, it has been nice sitting here watching everyone freak out over every little market move.

The sad part about this, however, is the basic lack of historical knowledge that the bottom callers seem to have. For those who believe it is the bottom, we only have to go back to the last "real" bottom back in October 2002 and March 2003 to see that we don't have anything shaping up now like we had then.

Nasdaq Composite - 2002-2003
Click here for larger image.
Source: TeleChart Gold

As you can see in the 2002-'03 Nasdaq chart, we had a lot of accumulation (circles and trendlines) off the lows with volume well over the average for the past 50 days.

Nasdaq Composite - Current
Click here for larger image.
Source: TeleChart Gold

Not only do we not have any real accumulation off of the lows, today, we don't have any above-average volume. This "bottom" has been extremely lame compared to the 2002 lows or the 2003 follow-through day, to say the least.

This is why it is impossible for me to become a raging bull here. I can tell that it is time to take in some of our shorts and raise cash, as we could get a bounce lasting between one month and three months. The last four times, before the March 11 and 18 rallies, the DJIA gained 400 points, the rally lasted between one and three months (2000-'02).

So while all the same people that told you we bottomed in November, December, January, February and earlier in March tell you that we have hit the real bottom here, I will let the market be my guide. That guide is telling me to be extremely careful here.

For me to get bullish, within the next 10 days, I am going to need to see a day where all of the major market indices gain 2% or more on volume that is not only above average, but much higher than the day before. Once I get this, I then must see more charts that look like Bruker Corp. (BRKR) and Buckle Corp. (BKE)

Bruker Corp.
Click here for larger image.
Source: TeleChart Gold

Bruker is breaking out of a cup-with-high-handle pattern on strong volume. Cut your loss with a close below the red support line. The circles are areas of heavy accumulation.

Buckle Corp.
Click here for larger image.
Source: TeleChart Gold

BKE is breaking out of a three-week tight base on very strong volume. Cut your loss with a close below the recent support. The circles show areas of heavy accumulation.

If more stocks can show up looking like this and I can get my follow-through day, I will be more than happy to join the perma-bulls in their camp of bottom fishing.

Until that follow-through day comes, just like the last six times they have called the bottom and been wrong, the bottom-callers are still just taking wild guesses, no matter how smart they try to sound.

If they are buying the bottom and still buying the wrong stocks, it will not matter if we are a few months late. While they continue to focus on that laggard, there will be many stocks that look like BRKR and BKE that will perform, just like Taser (TASR) and TravelZoo (TZOO) did in 2003 and 2004.

Do you think the people that only went long TZOO in 2004 were upset that they missed the bottom tick over a year earlier? Of course not! More money is lost trying to catch that bottom tick than will ever be made by the one moment you get it right. While some out there play this losing game, I will wait for my proof of a bottom via a follow-through day by the stock market indices.

Aloha from Ka'anapali beach where the whales are waving goodbye as they head north back to Alaska. When and where will our bullish whales return to wall-street? We'll take a look at where they might be heading by looking at another recent leading industry group on Friday.

At time of publication, Hayes was long Bruker Corp. and Buckle Corp., although positions can change at any time.

Joshua "MauiTrader" Hayes is CEO, president and founder of Big Wave Trading LLC, a Maui, Hawaii-based stock market advisory service. Hayes also runs BigWaveTrading.com, an online stock market commentary and stock selection service for short- and intermediate-term investment strategies using CANSLIM and other strategies. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. Hayes appreciates your feedback; click here to send him an email.