Major Buy Signal on the Broad Market

In one of my previous articles written a few months back, I suggested that we are in a broad base bull market, and one of the charts I used for this purpose has just given us another major buy signal.

According to the big board, an IP3 is confirmed this week. This is my IP model and this week's signal is the third such signal since the bull market began in early 2004.

IP1 was August 2004.

IP2 was May 2005

IP3 is now.

This IP3 also applies to the energy sector. (no kidding)

And the gold sector. (so much for my bearish analysis)

And of course, technology, which is the leader for the broad market.

And the driver for the tech sector. The fact that the semis have been under performing has resulted in a lot of bearishness in the broad market, but the higher lows and higher highs are very positive and we cannot ignore that. Once the semis are free from its shackles, watch out…..

Summary

Folks, price action has spoken, but we must take each sector on its own merits, and manage risk. Ideally, spread your dollars across the three sectors evenly, since we don't know which will be the best performer this time. Investors who are already holding some tech and some energy, can add to them using trader's set ups. Not all three sectors we cover bottom at the same time, obviously tech has bottomed first, again, and energy has since moved up smartly, and the only sector which is lagging behind is gold. Keep some of your powder dry and use it when gold finally bottoms, if and when.

Jack Chan at www.traderscorporation.com

4 November 2005