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Identifying a bottom: how to read the clues

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Mr_S
Super Contributor
there are two important features that identify climax selling. the first is rapid accelleration in the speed of the market fall, like a stuka dive bomber the market rolls over slowly and then plunges in a vertical dive. This is fear at work. the second feature is a massive increase in volume. This is panic. ordinary people are desparate to get out the market. Generally the funds and institutions got out of the long-side of the market many months ago. the selling in january and february was dominated by institutions and funds. The current panic selling is thousands of small orders from retail investors desparate to get out the market. During bear market collapse, volumes decline. fewer people want to buy stock so volatility increases because small trades have disproportionate impact in a shallow market. This selling climax shakes out all the weak hands in the market. it kills the margin speculators. it wipes out those who have finally lost patience. it removes the speculative money in the market because people think the risk is too great. the activity in the DOW and other markets shows an acceleration of downwards momentum. the massive increase in volume has not yet developed and this suggests the market bottom is not yet established.. (cnbc.com)
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1 REPLY 1
Not applicable
22 million BHP shares changed hands yesterday - that is pretty large!some resource shares (anglo, KUMBA, BHP) showing positive breakout on the OBV. IMHO I share Nova's view that the proof lies in the baltic shipping index - and a really good indicator for us will be when Merafe switches on their furnaces again and Mittal ups their production
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