Friday, 13 March 2009

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New Rally Just Beginning?

Well, Investor's Business Daily has now confirmed that we are in a market rally. That is probably their 5th or 6th confirmed rally declaration since the peak in October 2007. So, I don't think we should pay much attention to what they are saying. It's true that no new bull market has ever started without a reversal day and a consequent "follow-through day". But a bear market like this one deserves to be treated with caution when you get bullish signals that usually work. Because of extreme pessimism levels and an intense desire to sell each rally attempt fools people into thinking that "the bottom is in". I am skeptical of this current rally that we are in, which probably makes it more likely that it will last longer than I think. I was hoping and still am that we make one more new low, and then I can be confident that an intermediate low has been established. If we don't make a new low, I expect this rally to last several months. However, the "endgame" is lower lows in all the major indices over the next two years. Stocks have been bashed, people's pensions have been damaged severely, and confidence is low, but TIME is an important element. The rapid destruction of stock values and confidence will take time to repair, so it is unreasonable to assume that all the world's ills will be resolved in a few months just because the stock market went up for a few months. I contend that 514 days from top (October 9, 2007) to bottom (March 6, 2009) is not enough, in terms of duration, for the bear market to be over. Play the bounce, but realize it will be fleeting.

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