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The last time I told you to “beware of the ‘Dubya” bottom” was back in late-summer 2010 in this post, when the market had just finished putting in a major bottom before rocketing to climb a wall of worry via a multi-month bull run. To put it in simple terms, major tops tend to look like a big “M” on the chart, while a significant bottom can look like a “W.” As always, it can be easy to see what you want to see, rather than what is there.
Earlier today, I discussed how the financials had quietly set back up again, after taking a pause recently. Despite being widely despised and neglected by broken-hearted bulls from the prior few years of bearish action, the big banks have actually been one of the stronger areas of the market in recent months. If they have passed in front of the market and then resume higher, I think that will only reinforce the new bull case.
JP Morgan Chase and Morgan Stanley are two big banks that not only have solid daily chart setups for long swing trades, but also point towards a larger “W” bottom spanning several quarters. Note how in both cases, the highs from late-October 2011 have been breached, adding further evidence of a major, bullish “W” bottom.
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Love the pic. I like the rounded bottoms best.