The recent market rebound has shown a lot of legs ever since the S&P; 500 made a 12-year low on March 9th. This prompted many readers to ask whether this is still a bear market bounce or possibly the beginning of a new bull market.
Reader Mel had this comment:
As I’ve said before, I appreciate very much your sharing your opinions, including your passing on of the writings and videos of others. But for those of us who have been following your advice to stay on the sidelines (with the exception of the new hedge strategy) during the past few weeks, it would be very helpful if you could include a few lines in your daily blog just stating that you don’t trust this rally, even as the market continues to move higher 🙂
Thank you again for sharing your knowledge and opinions.
I pointed out in Bear Market Rallies that rebounds off new lows can be fierce and lengthy in duration. Of course, a subsequent correction can be just as violent as we’ve seen during the first couple of months of 2009.
To me, this is not a matter of trusting this rally. While I believe that this bear market is far from being over, it does not mean that we won’t get a prolonged period of rising prices even to a point where our domestic TTI signals an outright buy. If that happens, I will follow the trend; however, my hands will be placed firmly around the trigger for our exit points.
The line between bullish and bearish territory is clearly drawn in the sand, so there is never any question as to where long-term market direction is at. I’ve seen many newsletter writers being labeled over years to be either perennial bulls or bears.
I am neither.
If the market crosses the major trend line into bullish territory, I am bullish. If it heads south and crosses below the line, I am bearish. It’s as simple as that. I have no bias either way and let the market tell me what position to take.
Sometimes, when a period, such as this bear market, goes on for some time, a few readers have commented that I am too negative. That is incorrect; I simply go with the trend and my views at the time support the current reality and not some wishful thinking.
This allows me to treat events in the market place without too much emotion and simply focus on what’s most important, which is to be onboard when a major trend develops.
Comments 4
Patience is a virtue that has tripped up many an investor, including the author of this note over the years. As you look at monthly charts and see a rally since March 9, all of us wish we were invested to catch some of the expolsive upside. Unfortunately, you might as well double down in Vegas, because (as you have written) there is no way of seeing the bottom until it is in and replaced by a solid trend reversal. Ulli, your work allows us to do exactly that.I have recently checked some of the mutual funds I sold on your last sell signal in June and was not surprise to see some of them down as much as 60% from that sell signal, even with this rally—-you can only imagine how glad I am to miss this past rally for the opportunity to have saved my portfolio. All I need to do is figure how much of a return I would need to break even (if I had not sold them)to keep my hands off the BUY KEY—-But I am still as anxious and impatient as I have even been. I have found that over the years I have been able to make far more money by not loosing it in the bears, and I must give you the credit for allowing me to keep my emotions in check.
I am sick of the talking heads on CNBC that always preceed their comments by how last week, month, summer–whatever the time period– thay told you to do something that confirms or certifies their worthless value. I do not see how Cramer has an audience anymore with the money he has undoubtedly lost for people. If that is not bad enough, the network execs have him on the NBC network leading a whole new audiece down the path to oblivion. Kudlow has you broke—just examples of the junk spread by people such as them and the rest of the self proclaimed experts of the financial media.
Having written the above, I do see where Mel’s comment is coming from, because I read your blog daily just to receive confirmation that you are firmly on the track that you so generously share with us, even if it is just as simple as repeatng what you just stated.
Thanks again for your generosity in sharing your work,
Ray
Ray your blog message above was great and you are absolutely correct. I like you have made lots more money avoiding the bear markets and for that I am grateful and owe some of that gratitude to Ulli.
T.M.
Hi Ulli,
I am quoting Ray,
“Thanks again for your generosity in sharing your work,”
I’m just another reader of your daily blog, that most appreciates your time and dedication to helping us all.
Thank you, Thank you !
Stu
I don’t trust this as being a bull market, now. The analyst in the CNBC said the 150 day Moving Average should upturn within the next few months and that should indicate that the bear market is over. If it were all that simple, we would all be millionaires. What if his perfectly wonderful 150 day Moving Average indicator doesn’t turn up? What would he say we are in, then?
To me, the government’s effect on this market, is a huge “question mark” and one that we have never before seen in past history. So, I do not think we can read the signals of this market quite like we did in past markets’ history. That is one reason I do not trust that the bear market is over.
This week, I read an Associated Press article where author had read the minutes of the March 17-18 meeting of the Federal Reserve Board. I did not realize the Fed could buy Treasury Bonds, but apparently they can. At that meeting, the Fed took the highly unusual step to buy 30 year government Treasury Bonds, because the Fed was worried about DEflation.
While the stock market does not respond well to high inflation, it does respond well to a little bit of inflation. Of course, it would be catastrophic to the economy if DEflation occurred.
Anyway, my point is because of all the government involvement(Politics aside, is the government spending too much or not enough?), it makes it difficult for investors cannot get an accurate picture of what really is happening, based solely on historical data. The government never has taken these steps before. We are in new, uncharted territory, where it is best to move with extreme caution, I believe.
However, all of this government intervention, to me, for one thing, makes the market unpredictable. Also, I hear analysts saying they have already “discounted” bad economic news, before it is released, so when the the bad economic news is released, it does not matter. Well, it matters to me. Bad news is bad news.
I do not trust that the bear market is over. When the Chair of our own Federal Reserve Board continues to say our economy is fragile, and the Fed takes unprecedented steps, when the government is spending billions, and when there is continuing bad economic news, I do not think the bear market is over.