Mark Hulbert, at MarketWatch has an excellent piece out on the nature of the rally we are seeing right now. His idea is that this rally is so violent that it is probably not a new bull. Below are a couple of pastes, but read the whole peice here.
According to them, bear market rallies are almost by their very nature powerful and impressive. If we were to endow the bear market with intent, we would say that the very purpose of a rally is to draw as many gullible investors back into the market before the next leg down commences.
It turns out that the recent rally has been markedly more powerful than the average beginning of prior bull markets. Over the last two weeks, for example, the Dow has gained 18.8%. The Dow’s average gain over the first two weeks of past bull markets, in contrast, has been 8.4%, or less than half as much.
We want to stay clear of traps, yet, bull or bear rally, there’s a profit to be made in all this volatility.
From The Pragmatic Capitalist:
“… corporate earnings are going to slide again this year…we remain convinced that this is another bear market rally.”
The S&P 500 index suffered a net loss of $180bn, or $20.70 a share for fourth quarter, according to S&P. This is the worst performance ever, with records going back to 1935. Apparently, analyst’s forecasts are not yet conservative enough for first quarter either…look out below!  See FT article
Former columnist for TheStreet.com, Jack Steiman, said after the Friday, Mar. 6th close:
“The longer the oversold the stronger the bounce. It has been oversold for an incredibly long time and some very deeply compressed levels….This doesn’t mean we don’t go down to 500 on the Sp but I’d have to think that at the very least there is a rebound at hand, even if its just back to the 708 to 729 gap down levels from the very recent past.”
Well, Jack called the “rally” —wonder if the reference to 729ish has merit?            see: http://www.swingtradeonline.com/
TPC goes on to say:
“…it is practically impossible for a sustainable bull market to form without earnings visibility and improvement…The bear market is as alive as ever.”
When we can see real growth in earnings again, we can justify higher PEs. But Pandit leaks a memo at Citi and POOF! no more problems or worries? As if…
