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On This Bear Market Rally…

5 August 2009 1,147 views 2 Comments

This morning in the news a commentator called Charlie was talking about how he is thinking that this is a bear market rally. Interesting Charlie, but the real bears closed their positions many months ago. You know the bears that made the real money. All we have right now is double talk as witnessed by the following article.

“This has to be a bear-market rally,” Williams told CNBC.

Ok I understand.

Williams said investors need to have a sell discipline and that "buy and hold" is a dead philosophy. He told investors to prepare for some pullback.

Sorry do not agree here.

However, Engels told investors to put money on the sideline and wait for a better buying opportunity — “but we’re not going to be too fussy about the opportunity,” she said.

Oh ok, here is the bottom line…

This market will go down,and that you should not buy and hold, but if there is a slightest wiff of pullback buy buy buy…

I decided to do a search on bear market rally and found something interesting. Here is this character saying, “bear market rally, bear market rally…” That is not odd, but here is what is odd, namely the commentator.

yup. your are finally correct on something. this *is* still just a rally. close to 4 months after your first call of a top. And the correction that is ahead might not put the indexes that much lower than where you did call that top. Which means, in a strange way, that *your* correction will never happen. all the "old hands" you have loved to refer to in the last 4 months must be really pissed off at you for advising them to sit it out. good thing is, anybody who did decide to short the markets when you called the top, if they have not bailed yet, may end up getting close to most of their money back. meanwhile, what’s up with gold and silver? oh, that’s right, not much at all.

What we are witnessing here is the ripping off of the heads of the bears. When the market dropped to the degree it did it shredded the hopes of all bulls. Those bears who had been calling a drop were happy and raking in the big bucks.

Yet ask yourself was the market drop completely warranted? This is the question that everybody is ignoring. Was this market drop right? I say no, this market drop was not right. I am not saying that the market or recession was not due. I am saying we overdid it.

We overdid it because shorting became the new sport in the mainstream media. I am not complaining, just writing things as I see them. This new behaviour of shorting made mince meat of portfolios like mine. Again not complaining because it gave me opportunities to buy at very low values. 

As my trader on the team said to me regarding yesterdays last minute dash.

That was pretty bogus. Whole foods had good earnings, but I think the bears just needed to one last dash of hope ripped away… There must be some serious scratching heads…

So why is this pullback not coming? Oh it will come, but not like how everybody think it is coming. Will be bad? Not likely, but enough to make the bears happy until they get ripped to shreds. If this market were any other way we would all be trillionaires.

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2 Comments »

  • Bill said:

    brilliant analysis. so because media over-hyped shorting, the market pullback was over done. this is your explanation of the ridiculous climb since March?

  • Christian Gross said:

    The climb in March is both ridiculous and not.

    Let’s assume that pullback was overdone. Then the upswing would be just as overdone.

    But let’s assume for the moment that there was not this overdone drop, where would be? I would argue about here…

    When I ran my numbers last year and somebody called for S&P 1000 I said no way! Of course I was proven to be quite wrong. Thus this climb back is not overdone. It is a step back to normal.

    Though there are some very important lessons here.

    1) If a stock has bad earnings their share price will be hammered hard, and I would argue the old norm is out of the window. The new norm being about 10% to 15% of ultimate high.

    2) Shorting and perception is becoming a stronger part of the overall market structure. Thus as a retail investor you need a thicker skin.

    3) Money management is more important than actual strategy. Granted a loosing strategy cannot be made into a winner using money management. But a winning strategy can be made into a loosing strategy with bad money management.

    4) Catching knifes is part of the game.