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Stage 1: “It’s all over”
The first stage of a bear market rally starts when the markets react to bad news as if it was good news. Whether it’s because bad news isn’t as good as bad as expected or it’s one of those “Green Shoots” which provide a glimmer of light perceived to be the end of the tunnel.
This happens when everyone thinks it will never turn around. It’s when many investors throw in the towel and proclaim “it’s all over.” We hit that point in early March. Since then the markets have been so beat up in such a short period of time that any bit of good news can get things rolling higher again.
Stage 2: Popular Declaration of Bear Market Rally
This is the stage where most commentators admit we’re in a bear market rally. The upswing has just been too strong and has lasted so much longer than initially anticipated by most, it’s obvious to everyone.
There are no fundamental drivers and the fundamentals matter very little in this stage. Dividend yields, P/E’s, growth, and forward estimates aren’t focused on very much. The prevailing “thesis” (i.e. stimulus spending will be great news for infrastructures stocks) is much more important than the underlying fundamental situation – a.k.a. reality.
Most everyone goes on to warn this is a bear market rally and advise against buying too much of anything now. It’s also a time when we hear things like “this is a trader’s market.” Which any market should be a traders market, given the wide number of strategies which work in bull, bear, and flat markets.
tage 3 – “All clear! Get in before it’s too late.”
This is the final stage. It’s when the bear market has been forgotten by most. Stocks move up, but the big upswings have disappeared.
This is when the very real risk of “panic buying” sets in. This is a result of the big money fearing 1) it has missed all the chances to buy low, 2) their performance will suffer, and 3) customers will take their money elsewhere.
To make up for lost time, they buy very aggressively. Many of them think short-term and want to deliver the numbers to keep pace with the competition in the money management industry. This is an extremely profitable stage for those who went against the grain and bought during the earlier stages of the rally. You’ll also see a general decline in the VIX (37.15 ↓2.49%). It currently sits at below 34 – well below its recent range of 50 to 90.
Yet when the big money runs out of cash to buy shares, watch out, the end of a bear market rally is near. |
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狗仔卡
发表于 2009-4-24 07:47 PM
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