Over the past 6 weeks, there’s been a lot of attempts at forming bottoms in the stocks I cover at HEDGEfolios. I’ve given about 1000 new UP signals during that time and until the middle of last week, I was starting to think that the market had a good chance for a bear market rally to continue for a little while. That still may happen but my optimism is no longer there.

One of the dangers of stocks trading near an apparent bottom occurs when the bottoms drop out. In this volatile market, there has been very little convincing volume to solidify whatever bottoming appeared to be happening. The moment we face any pressure to the downside and the recent buyers are tested. If they take profits, the bottoms drop out. If they just hold and fail to provide new buying demand, the bottoms drop out.

Last week’s action poked a lot of holes in very weak bottoms. There was no capitulation on January 22nd when the Super Stallion dropped rates.  It’s not going to take a lot of selling to move prices dramatically lower.  On the other hand, it will take a lot of buying to hold 1270.  If a flood of buying does not happen very soon, you can kiss your bottom goodbye.