TUTORIALS:   Home   Rolling Stocks   Stock Report   Strategies   TC2000   Sector Watch   Questionnaire

Previous    Join Now!    Next
Problem accessing the SUBSCRIPTION server?

How to tell when a market RECOVERY has actually occurred
*  The analysts will continue to argue, however the majority will agree that the recovery is occurring.  DO NOT assume a full recovery after the first major upturn in the market- if you look at the chart of the market in question (use compqx or nyse for symbols in TC 2000) you will note that the 'bottom' looks like a V, however the market will almost always test that bottom one more time, so the bottom looks like a W, called a 'double bottom'.  A true double bottom is usually formed as follows:
(1.) extremely heavy trading volume on the downside generally over a one to two week period creates a nearly vertical dip, then
(2.) light volume on the upside creates a bounce for perhaps a couple of weeks, then
(3.) extremely heavy volume on the downside retests the lows of the prior dip, followed by
(4.) extremely heavy upside volume.  If you purchase, purchase at the upturn of the second dip at the bottom, when stock prices begin to rise again, but purchase carefully and slowly as a full recovery may take upwards of six to nine months.

*  If the fed cuts interest rates twice in a row (in two sessions) who cares what the analysts say... in the vast majority of cases the signs of a recovery are as follows:
(a.) the market immediately responds with major 'instant' upturns,
(b.) the long term declines cease to exist (for the time being) and
(c.) six to nine months later the market usually clearly begins to strengthen.

*  The market often goes through three phases:
(A.)  the CORRECTIVE phase where stocks with overextended P/E (price to earnings ratio) come back down to earth, in other words sell off.  This is a great time to sell great rollers short at the resistance or to purchase defensive rollers.
(B.)  the CONCERNED phase where people are 'worried' about where the market is going.
(C.)  the CAPITULATION phase, where people simply give up, and selling is sudden and very harsh (see the information on the 'double bottom' formation above).  This usually takes place over the course of weeks.  This phase does NOT mean the market fundamentals are solid, it simply brings stock values more in line with the current economic conditions, easing the concerns of the investor.   Ask yourself:  "Are the problems in the market spreading internationally"?   If so, it may delay this phase.  It is from this phase that the long term slide ceases and growth begins anew.
(D.) the RECOVERY demonstrates immense stock buying volume along with plentiful dumping of defensive shares in the market.  Talk in the market is that we HAVE reached bottom, P/E ratio's are within the realm of reality, the consumer believes in general that it's a good time to buy for the long haul, and worry is no longer prevelant.  Remember this rule of thumb:  as COPPER goes, so goes the economy!  (think about it!)   Poor earnings and economic reports no longer drives entire sectors immediately south.  Start to purchase great rollers (preferably range riders) at a moderate pace, and rid yourself of your shorts.  Don't concern yourself with every little correction from here.  Don't wait too long... much of the early increase in recovery is either profits going into your hands or someone else's.

Of course we will continue to logically adjust our reports to maximize prospective profits and minimize losses within all of these phases.

Here are some examples of top performing market sectors at the beginning of many major market recoveries.  You'll note that they're 'BIGGER PICTURE' stocks in that they don't focus on any given type of product- a 'snapshot' which demonstrates that investors are ready to switch to the more riskier, volatile and less conservative stocks.   Wait for most of these stocks to clearly turn upward together:
TECH STOCKS - people are more comfortable with purchasing 'riskier' and more 'volatile' high return stocks
TRANSPORTATION - there are consumer products to move quickly
RETAILERS - people are buying more non-discounted goods instead of saving their money
AUTOMOTIVE COMPANIES - people are willing to spend their money for new vehicles
COPPER & ALUMINUM - metals needed for the infrastructure (communications, products, etc.)
RADIO - advertising revenue increases due to competition for product sales
TELECOMMUNICATIONS - big $$$ necessary for expansion should become more accessible
FINANCIAL - people are interested in financial matters, including investing
NEWSPAPERS - people are interested in financial matters, information

The EASY and FUN way to assess these sectors is to acquire the free (intermittently posted)SECTOR WATCH reports!

You may want to DUMP THESE STOCKS progressively at the bottom of the market landslide:
Drug Manufacturers
Utilities- Natural Gas
Utilities- Electric
Banks- Large Regional
Savings & Loans
Diversified Financial
Business Services
Restaurants
Food Production
Beverages- Soft Drinks
Beverages- Alcoholic
Tobacco
Insurance- Life/ Multi
Insurance- Brokers
Insurance- Property/Casualty
Personal Cosmetics
Hotels/ Motels/ Casinos
Medical- Health Services
Medical- Products
Hospital Management
Oil- Domestic
Oil- Services
Oil- International
Household- General Products
Diversified Manufacturing
Media- Misc. Publications (old)
Shoe Manufacturing

SAMPLE REPORT
Disclaimer & Notices