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home | Market Bottoms | July 2006

July 2006

Note:  The historical stock examples given below are for EDUCATIONAL USE ONLY.  They ARE NOT to be used to make buy/sell decisions in today's market.  For more information, please read the HSR Terms of Use.

The 2006 Market Bottom was an excellent example of how bases provide leadership off a low and how they also move into position (mature) to reinforce a rally with fresh breakouts in the months that followed the July 2006 Bottom. 

The rally from the July '06 low (Nasdaq) was the second strongest leg of the 2003-2007 Bull Market as it advanced 35% in 12 months

In contrast, the 35% rally from August 2004 to April 2006 (20 months) was a choppier advance.

In May 2006, housing stocks started breaking down.  

A leading group since the Summer of 2000, the Homebuilders 5+ years of gains were unraveling fast.

From April to July '06, the Housing Sector Index (HGX) declined 30%.

Many were urging investors to get out of the stock market because of housing, but the market's price action was saying otherwise. 

Stocks not directly related to the housing market were breaking out and other groups were taking a leadership role in place of the Homebuilders.

It's important to note that the demise of a market leading group isn't necessarily fatal for the market as long as other groups rotate to the forefront and take hold of the reins of leadership.

This emergence of group leadership is shown below in the charts of the Fertilizer Stocks, which began a big run after the Housing Index Break of 2006.

All of the featured stocks had large gains from their respective base breakouts (MOS 860%, CF 800%, POT 620% and SYT 130%) to their tops.

Historical Stock Chart Examples 1A-1D:  Group Leadership from Fertilizer Stocks in 2006

Click to enlarge 1A

Click to enlarge 1B

Click to enlarge 1C

Click to enlarge 1D

Please click on the links below to see some of the base breakouts from the 2006 Bull Market:

(coming later)