ChartWatchCentral Premium Stock Picks

Double Dip Myth

by
Christina Nikolov
Founder/CEO, ChartWatchCentral, Inc.

Date: August 13, 2010
Company: *
Ticker: *
Price: *
Opinion: Bullish

Comments: We strongly believe several significant stock market sectors are in the process of potentially bottoming. Psychology plays a tremendous role in price movement and we feel that the recent economic figures, while likely 'one step back' within a very anemic economic recovery, have investors falsely anticipating a double dip recession. As a result of this fear throughout the investment community, the market indices and sectors are working their way back to significant support levels.

There is always a point within every economic recovery, where people expect a double dip recession and we think this is where we currently reside along the economic cycle time-line. Employment always lags, housing lags, etc. Even when economic conditions are improving, a lot of economic indicators lag, resulting in a doom and gloom mindset and stock market weakness. This inevitable disconnect results in undervalued securities and is precisely when you should be buying.

The following charts depict what appears to be 'head and shoulders bottoms' and one potential 'triple bottom.' Volume has been drying up significantly as these patterns unfold, which is tremendously bullish.

There is a high probability that this recent pullback might only last another few weeks, pushing the Dow Jones Industrial Average and S&P 500 Stock Index to possibly as low as $9800 and $1042, respectively. After Labor Day, expect trading volume to surge, resulting in a potentially strong rally through year-end.