Yesterday was another example of constructed technical bounces. As much as I love technical analysis in general, I hate this particular kind. The last time I wrote about this was 2 months ago, when bullish programs were supposedly trying to create support at 1400-1420. Back then, some people suggested that a triple bottom was formed as a result of their crafty efforts. I simply said I would ignore it because technical patterns that are manufactured just don’t hold up. So it wasn’t a shocker that we found our way 1000 points lower than the previously solid “triple bottom.” Yesterday’s programmed attempt to build support at 1280-1300 doesn’t do much to impress me either.

And one more thing, I heard more than a few comments about a “double-bottom” formed between the low on Tuesday and the low on Wednesday around 1275. Please read up on the requirements for forming double-bottom reversals, here’s a great explanation from Stockcharts.com. If you don’t like that one, try this one. Pay special attention (in both explanations) to how long it should take to form the two bottom points. It’s weeks or months, not hours.

Here’s a rule of thumb:

• If a pattern forms in minutes, expect that it is valid for minutes.
• If a pattern forms in hours, expect that it is valid for hours.
• If a pattern forms in days, expect that it is valid for days.
• If a pattern forms in weeks, expect that it is valid for weeks.
• If a pattern forms in months, expect that it is valid for months.

I am sure you get the point. There’s a lot of crappy technical analysis being offered up these days, please watch out.