Monday, 11 May 2009

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A Rise in Optimism

Here's an excerpt from the April issue of Elliot Wave International's Elliot Wave Theorist: [The current rally]", regardless of its extent, should regenerate substantial feelings of optimism. At its peak, the President's popularity will be higher, the government will be taking credit for successfully bailing out the economy, the Fed will appear to have saved the banking system, and investors will be convinced that the bear market is behind us. Be prepared for this environment; it will be hard for most investors to resist. But beware: Wave 3--the steepest portion of the steepest wave--will be the most intense COLLAPSE in stock prices in nearly 300 years. The perverse result of wave 2 will be to get people even more heavily invested than they already are, just before wave 3 starts."

My sentiments are exactly in line with this excerpt. The nature of bear markets is to suck investors back in on every subsequent rally from every decline. So be aware when the mainstream media, the Obama administration, the Fed, and anybody else starts saying the "worst is over" and "we are on the road to recovery".

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