Bear's end ? Wishing won't make it so !
Last week's rally tempted many to believe that the market has bottomed. Maybe some stocks have hit their lows, but there are many reasons to proceed with caution.
No doubt, long-suffering bulls will proclaim the stock market's bravura March 10 performance as proof that the bottom is in. The bears will beg to differ, citing the insufficient capitulation in evidence. I seriously doubt that stocks have seen their final low. When we get to a really recognizable lowest point, I don't think we'll need to reach for a magnifying glass or devise a tricky way to analyze it. As market commentator Justin Mamis points out about the 1982 market low:
"Big black headlines almost as huge as those announcing the end of World War II were spread across the entire top of the New York Times: 'The Market Rises on Huge Volume' (or words to that effect), and up and up the market went for several days after. In other words, you knew a bottom when you saw it. You could have been a few days late and still on time."
Within this bear market, could we have a substantial rally that might last for a while? Absolutely. (In fact, we had one off the November low that ended relatively recently. We may have many more.)
These are markets, and they can do what they want, especially when there are as many moving parts as now exist. But I think the probability that the worst has been seen is extraordinarily low. (Though perhaps some companies will not make new lows; that we will just have to see.)
And no matter how good a rally looks, it must be remembered that the best ones always occur in bear markets. (As I noted last week, "A bear market rally . . . will be captivating, causing people to believe the worst is over, but will almost certainly be a head fake.")
Here's what I think will be part of the final capitulation process: Valuations in the tech sector will experience the cleansing drop that other companies in corporate America have recently undergone, especially if more progress is made on the nationalization of the banks in the meantime.
So, for those who'd like to see this decline end (and who wouldn't, really?), a rout in tech stocks might be just what is needed.
http://articles.moneycentral.msn.co...nicles/bears-end-wishing-wont-make-it-so.aspx
Last week's rally tempted many to believe that the market has bottomed. Maybe some stocks have hit their lows, but there are many reasons to proceed with caution.
No doubt, long-suffering bulls will proclaim the stock market's bravura March 10 performance as proof that the bottom is in. The bears will beg to differ, citing the insufficient capitulation in evidence. I seriously doubt that stocks have seen their final low. When we get to a really recognizable lowest point, I don't think we'll need to reach for a magnifying glass or devise a tricky way to analyze it. As market commentator Justin Mamis points out about the 1982 market low:
"Big black headlines almost as huge as those announcing the end of World War II were spread across the entire top of the New York Times: 'The Market Rises on Huge Volume' (or words to that effect), and up and up the market went for several days after. In other words, you knew a bottom when you saw it. You could have been a few days late and still on time."
Within this bear market, could we have a substantial rally that might last for a while? Absolutely. (In fact, we had one off the November low that ended relatively recently. We may have many more.)
These are markets, and they can do what they want, especially when there are as many moving parts as now exist. But I think the probability that the worst has been seen is extraordinarily low. (Though perhaps some companies will not make new lows; that we will just have to see.)
And no matter how good a rally looks, it must be remembered that the best ones always occur in bear markets. (As I noted last week, "A bear market rally . . . will be captivating, causing people to believe the worst is over, but will almost certainly be a head fake.")
Here's what I think will be part of the final capitulation process: Valuations in the tech sector will experience the cleansing drop that other companies in corporate America have recently undergone, especially if more progress is made on the nationalization of the banks in the meantime.
So, for those who'd like to see this decline end (and who wouldn't, really?), a rout in tech stocks might be just what is needed.
http://articles.moneycentral.msn.co...nicles/bears-end-wishing-wont-make-it-so.aspx
