5. How Major Market Bottoms Form: Part II, Accumulation and Breakout

The initial phase of the development of a major market bottom involves the latter stages of the bear market and the very early stages of the accumulation process. At this point in the process, however, selling has not yet been fully exhausted, as few investors believe with conviction that a bottom is actually in place. In fact, it is near the end stages of a bear market when the financial press is typically filled with articles projecting a deepened and protracted decline for equities in the weeks, if not months, ahead. This feeling of continued despair on the part of equity investors is often bolstered by economic data which, at this point in the bottoming process, still indicates ...

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