Mini-Crash This Week, But What Happens Next Week?

March 2, 2007

The mini-crash in the U.S. stock market and most of the world's financial markets on Tuesday, dropping the Dow Industrials (DJIA) some 540 points intra-day, has turned most technical analysis on its head. What happens in the coming week? Two weeks?

Looking back at previous sharp one-day corrections (mini-crashes) over the past 30 years shows some interesting patterns. For the two to four days directly following these corrections, stocks had huge swings of hundreds of points at a time. After this the markets resumed their decline and new lows were reached in two to three weeks. Those new lows appeared to be panic lows with high volume. But in the midst of the new lows, a bottom is created and a sharp reversal day occurs.

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Kollar is editor and chief analyst at FibTimer.com (http://www.fibtimer.com) which offers market timing strategies for S&P and Nasdaq index fund traders, as well as bond, gold, small cap, sector, ETF and stock trading strategies.