Editor's Note: This column was originally published Tuesday on RealMoney -- on the eve of the big move in the market. For a free trial to RealMoney, click here. Or if you'd like to take a free look at Alan Farley's newsletter, click here.
We've seen neither the highs nor the lows for this year, and we're getting close to a major buying opportunity. It hasn't happened yet, but the ingredients are falling quickly into place. Traders and gurus are finally starting to chase the downside. This should increase public fear and trigger volatility index readings into the low 30s. That golden moment could give us the best reward-to-risk ratio since March 2003.
The indices are approaching their 200-day moving averages, another key ingredient for a sustainable low. I'd look for a period of testing those price levels before upside momentum comes back into play. Use caution and fade early buying surges that losers will use to get out of bad trades.
|Line in the Sand |
The indices are approaching an important test
|Index||Monday Close||200-Day EMA|
|Phlx Semiconductor Index||459||466|
|Source: Alan Farley|