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Tuesday, March 04, 2008

Bob Brinker's Low 1300s Buying Opportunity

  • On February 21, Peter Brimelow wrote of Bob Brinker's "Buying Opportunity" in the S&P500 mid 1300s. [ See "Bob Brinker Likes Low 1300s According to Peter Brimelow"]. All conditions are being met so far today. Unless we get a sudden surge of volume in the last hour to take us from under 4B to over 6B shares, which is not probable, we should have a test of the January 22nd low.

    Brimelow wrote:
    • Brinker said recently: "Marketimer views the establishment of a correction bottom as a process which unfolds over a given period of time. This process involves the initial establishment of a closing S&P 500 Index low, followed by a short rally, followed by a test of the area of the previously established low on reduced trading volume. The initial closing low in the current stock market correction process occurred on Jan. 22, when the S&P 500 Index closed at 1310.50. The market subsequently rallied for eight days, at which point it began the process of testing the area of the Jan. 22 closing low."

      "In our view, the correction bottoming process has proceeded with a high degree of historical consistency to date. We have witnessed a decided reduction in selling pressure during the testing process, which is essential to a successful outcome. We now rate the stock market attractive for purchase on any weakness that occurs in the current area of the S&P 500 Index low 1,300s, or any minor weakness that occurs below that level."

      Market timer's summary: "As has been the case with every correction since August of 2007, several stock market pundits are claiming that a bear market is underway. We do not believe this is the case. We expect the S&P 500 Index to work its way into record new high ground by late this year or in 2009."
  • Well, it looks like today we have a test of the January 22 low with lower volume.

    Click image courtesy of stockcharts.com to see it full sized

Did the "Bottom Bell" ring at your house? Did you grit your teeth and buy through your fear today? I bought stock today.

It should be noted that with the S&P500 at 1411, Bob Brinker sent out a bulletin to his subscribers on August 16, 2007 that said:

"Any further testing of the area of the correction lows, which we expect to be close to the current S&P 500 Index level (1411), is regarded as an additional buying opportunity for subscribers looking to add to stock market holdings."

and

"Marketimer expects the S&P 500 Index to register new historic record highs as we move forward into next year."

Visit our Facebook Bob Brinker Discussion Forum at "Investing for the Long Term" to ask questions or discuss this article.

Disclaimer: I own SPY (the Exchange Traded Fund for the S&P500) in my IRA. Also, I did some buying of an "explore stock" from my newsletter "Explore portfolio" today with money from taknig profits when the market was higher.

After Market Close Update (1:20PM PST)

You can see from the chart the market probed the January 22 closing lows on much lower volume. Even more exciting, it finished the day with a very bullish "Dragon Fly doji"

From Stockcharts.com

Dragon Fly and Gravestone Doji



Dragon fly doji form when the open, high and close are equal and the low creates a long lower shadow. The resulting candlestick looks like a "T" with a long lower shadow and no upper shadow. Dragon fly doji indicate that sellers dominated trading and drove prices lower during the session. By the end of the session, buyers resurfaced and pushed prices back to the opening level and the session high.

The reversal implications of a dragon fly doji depend on previous price action and future confirmation. The long lower shadow provides evidence of buying pressure, but the low indicates that plenty of sellers still loom. After a long downtrend, long black candlestick, or at support, a dragon fly doji could signal a potential bullish reversal or bottom. After a long uptrend, long white candlestick or at resistance, the long lower shadow could foreshadow a potential bearish reversal or top. Bearish or bullish confirmation is required for both situations.

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