LOOKING FOR THE BOTTOM
After the market has declined for some period of time investors/speculators start to get anxious and begin looking for a bottom. This is a normal reaction. It could, however, be dangerous to your investment or speculative capital. When you are “looking” for the bottom you might see things and mis-interpret events in an effort to catch the bottom. I like to try and catch a bottom too but in the end my final judgment about where the market is and where it might be going is based upon the indicators and what I interpret they are telling me. However, let’s look at the question that anonymous has asked. In the comments section to yesterday’s weekly commentary anonymous wrote:
Any comments on the 30 week RSI on the weekly index? The last few times it was at these levels there was a multi week rally. I am interested in what you think o fthis indicator...
My Weekly Uranium Index was developed a few years back and is only 5 years old (see chart for full Index). Such limited historical information is not enough to base decisions of capital investment upon, even speculative investments. For a longer historical data I have included a similar chart of Cameco Corp. going back a couple of bull and bear markets. Cameco, being the grand-daddy of the uranium stocks, is often used as a proxy for understanding what’s happening in this industry. Both the stock and the Index act in a very similar manner with a similar RSI chart. Both have their 30 Week RSI at just about the same level at the present time, just above the 40% level.
Anonymous is quite realistic to ask the question, based upon the limited data of the Index but once we see more historical data (using the stock) we see that any assumption of a bottom, or even of a rally, could end in disaster.
Now, I don’t want to throw cold water on any thought of a bottom but if we take a hint from previous Cameco history a bear market could last for years and drop a lot lower than anyone expects. A drop such as the 1996-2000 bear market could take Cameco to about the $12 level and the Index similarly. The RSI dropped to the 33 level during that bear.
For determining the long term perspective of the market (stock or Index) I find the 30 Week RSI very valuable. A slightly more accurate indicator would be the daily version, the 150 Day RSI but not enough to make much of a difference from the long term perspective. I would not look at the long term indicator to make short or intermediate term investment or speculative decisions except as a cautionary indicator.
My view would be to look at the intermediate and/or short term indicators to try and pick a bottom, if one was so inclined. Otherwise, I might suggest that one should study my daily and weekly commentaries and tables of technical information and go with the judgment of the various time period ratings. By following the appropriate charts and indicators I may not be right all of the time but I don’t think I would be wrong for any length of time before the charts and indicators correct themselves.
After the market has declined for some period of time investors/speculators start to get anxious and begin looking for a bottom. This is a normal reaction. It could, however, be dangerous to your investment or speculative capital. When you are “looking” for the bottom you might see things and mis-interpret events in an effort to catch the bottom. I like to try and catch a bottom too but in the end my final judgment about where the market is and where it might be going is based upon the indicators and what I interpret they are telling me. However, let’s look at the question that anonymous has asked. In the comments section to yesterday’s weekly commentary anonymous wrote:
Any comments on the 30 week RSI on the weekly index? The last few times it was at these levels there was a multi week rally. I am interested in what you think o fthis indicator...
My Weekly Uranium Index was developed a few years back and is only 5 years old (see chart for full Index). Such limited historical information is not enough to base decisions of capital investment upon, even speculative investments. For a longer historical data I have included a similar chart of Cameco Corp. going back a couple of bull and bear markets. Cameco, being the grand-daddy of the uranium stocks, is often used as a proxy for understanding what’s happening in this industry. Both the stock and the Index act in a very similar manner with a similar RSI chart. Both have their 30 Week RSI at just about the same level at the present time, just above the 40% level.
Anonymous is quite realistic to ask the question, based upon the limited data of the Index but once we see more historical data (using the stock) we see that any assumption of a bottom, or even of a rally, could end in disaster.
Now, I don’t want to throw cold water on any thought of a bottom but if we take a hint from previous Cameco history a bear market could last for years and drop a lot lower than anyone expects. A drop such as the 1996-2000 bear market could take Cameco to about the $12 level and the Index similarly. The RSI dropped to the 33 level during that bear.
For determining the long term perspective of the market (stock or Index) I find the 30 Week RSI very valuable. A slightly more accurate indicator would be the daily version, the 150 Day RSI but not enough to make much of a difference from the long term perspective. I would not look at the long term indicator to make short or intermediate term investment or speculative decisions except as a cautionary indicator.
My view would be to look at the intermediate and/or short term indicators to try and pick a bottom, if one was so inclined. Otherwise, I might suggest that one should study my daily and weekly commentaries and tables of technical information and go with the judgment of the various time period ratings. By following the appropriate charts and indicators I may not be right all of the time but I don’t think I would be wrong for any length of time before the charts and indicators correct themselves.
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