Rev Shark:
A Wimpy Market Will Help Bulk Up the Bulls
4/7/05 8:43 AM ET
"I am not discouraged, because every wrong attempt discarded is another step forward."
-- Thomas A. Edison
A healthy market requires regular doses of failure, and it is failure that helps pave the way for future success. Only after various attempts and approaches have been turned back does the market eventually find the path to success. However, traders are an impatient bunch and they don't tolerate periods of failure very well. They want the market to always go up; failure is viewed with frustration and not a necessary ingredient for success.
Yesterday we had what some would consider a healthy reversal in the market. We have had a very weak bounce attempt for a few days and it looked like it might continue at first, but shortly after the oil inventory numbers hit, the market rolled over and trended down the rest of the day. Particularly noteworthy was that oil prices also weakened but that didn't help support the market. The indices were weak even when given a good reason not to be.
That may seem disappointing but it is that type of failure that eventually helps build a stronger market. The folks who are uncertain and unsure eventually give up, the bears become somewhat satisfied, and the stage is set for strong and confident buyers to drive the market.
The best thing that can happen for the bulls is to have early bounce attempts after a downtrend failure. It is through this process that the market grows stronger and ensures that future attempts will succeed.
Even if you are a raging bull, learn to appreciate the value of market weakness. It is only because of weakness that we can enjoy future success.
The weak nature of the recent bounce along with some leadership in medical stocks and pockets of momentum is making me feel that a better tradable low is approaching. My working thesis right now is that the market is setting up for some strength on increasing optimism about first-quarter earnings reports. I'm seeing some better action in individual stocks even though the major indices still have some major technical difficulties.
Oil is up rather sharply to start the day, weekly unemployment claims are in line and indications are close to flat. It should be another tricky day.
Gary B. Smith:
