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The Case For A Bottom Wins



August 22, 2011 – Comments (0) | RELATED TICKERS: CAT , MMM , AAPL

The markets are holding just around the flat line today. Panic still remains and many believe another collapse is around the corner. While the average investor is beginning to panic, seasoned traders are avoiding emotion and looking at reality. When looking at reality they are buying for the short term, looking for a bounce. There are many signals pointing to the fact that the lows were in on August 9th, 2011 when the S&P 500 had a 70 point reversal off the lows.

First, the short term lows back on August 9th have not been taken out. Technically, this current pull back is a higher low. As long as that holds, it signals a move up coming. In addition, gold is at obscene levels. As it approaches 1900 per ounce, every small investor is jumping on the gold wagon. In the short term this spells distribution by institutions and a pull back. If gold falls from its over extended levels, money will flow into stocks. Next, Federal Reserve Chairman Ben Bernanke is speaking at Jackson Hole on Friday. This is an annual event and just last year, at the very same event, he debuted the idea of QE2. This will keep shorts from shorting later this week and some shorts will cover. It may give the markets a short term bid. Lastly, the Labor Day Holiday weekend is fast approaching. It is rare to see a market collapse into a holiday. Generally, as volume dries up the markets rise.

These factors are all contingent on the pivot low holding on the S&P 500. This level on the SPY is $110.25. The SPY is the tracking ETF for the S&P. Many key stocks are at major support levels. A strong bounce should be around the corner.

Gareth Soloway

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