There’s Never Been A 300-Point Rally in A Bull Market

I found an interesting article written by Keith Fitz-Gerald, An Investment Director of Money Morning, on August 12 2008. He wrote, "Yet, at the same time, the Dow puts in two barnburners like those last Tuesday and Friday when the index rose 331.62 and 302.89 points respectively. Which begs the question… what do we make of the rallies?

Two words – 'bear trap'."

David Rosenburg, an investment analyst with Merrill Lynch & Co. Inc. (MER), points out something we know from our own proprietary research to be true. There’s never been a 300-point rally in a bull market. Let alone two of them in one week.

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Keith added that If history holds true, then there are three key takeaways:

1. Until the rebound reflects stronger earnings, sales growth and a generally improving economic scenario, rapid upside moves like those last week are nothing more than king-sized bear traps ready to snare the unsuspecting.
   
   
2. Companies are girding for rougher times ahead by selling into strength. This would not be the case if things were truly getting better. Nor would London Interbank Offered Rate (LIBOR) /Treasury spreads be widening the way they have been recently.
   
   
3. What we are experiencing now is nothing more than a continuation of the broader bear market patterns that began in 2000 and which may continue through 2012 or 2015.

Related Posts :

1. Six Reasons to Short Financial Sector Again
2. US Stocks are Still Overvalued
3. Market Lessons From 2007
4. Valuations are The Key to Long-Term Returns
5. Dow Jones 300+ Point Moves and Bear Markets

Please Note!
This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

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