It Is Still a Bear Market

Good bounce yesterday. Sold my Wednesday's lot of Spiders (SPY) at the end of the day. Hit it to quit it.

I don't believe it's a bottom. We had a typical bear market rally yesterday, 550+ Dow points without any meaningful news. We might even go higher, for a while. But there is no reason for a sustained stock market growth.

And mood on the Street is not what it should be at the bottom: we need doom and gloom, complete capitulation of bulls, growling of bears to make a bottom. A real bottom happens when almost everybody is bearish, when almost everybody sold everything. Then, there is nobody else to sell anything and the market starts rising. That's about what Jim Cramer says. That's what I'm waiting for. So far, let's make money on volatility.

Full disclosure: at the time of publication author didn't have any positions in SPY. Positions can change any time.

Comments

[veeblefetzer:]

Seems like all gloom and doom to me... I haven't heard from any bulls for a while, just the mutual fund companies telling everyone to stay the course. But that doesn't make them bullish - they naturally don't want everyone pulling their money out out of their funds.

2008 Nov 14 07:59 AM

[Smarty_Pants:]

"Seems like all gloom and doom to me... I haven't heard from any bulls for a while" - Paul H

When everyone stops asking if it's the bottom yet we'll be much closer. As the author's title points out, it's a bear market until then.

2008 Nov 14 10:14 AM

[investor88:]

Good take of the current situation ie still bearish but can trade some on the volatility.

2008 Nov 14 10:19 AM

[Shiv Kapoor:]

From the bulls - there are a bunch of stocks trading at amazing values. Buying prices do not represent fair value when looking at growth in a medium term context - this is an opportunity to buy. While the SP500 might hit 740 at a bottom, it makes no sense to wait; it might never happen. In the interim, values are good and several are supported by sustainable dividends. 100% upside in medium term is probable, downside is maybe 15%, so risk reward equation is stacked in favor of buyers.
Have a look at CCL HD DAI BP RDS-B AXA PFE DELL INTC NOK AA MT FCX DD VOD SI DE KFT - all compelling valuations with strong yields with a maximum yield drop expectation of between 0% and 20%. I'd go heavy on industrials, energy & materials as those will drive once growth returns - you can look for growth being financed more through equity and less through debt - so project quality will be better because they will only be taken when cost of equity is below return on equity. Growth, once barriers are removed is a compelling force; nothing can stop it. Emerging Market Global growth drivers are intact - in a couple of years you will see the most amazing and aggressive growth return.

2008 Nov 14 12:10 PM

[John Lounsbury:]

The bulls haven't given up. They're still holding on. We'll know when they give up when either (1) we get one or more big down days with very high volume (2-4 times average) or (2) we have a period with several up days with extremely low volume (25-50% of average).

Then the question will be whether we will have a sustainable rally or simply sucker the bulls back in before making new lows..

2008 Nov 14 02:20 PM

[johngaltfla:]

Until you hear the word "bottom" eliminated from the Bubblevisionistas vocabulary, we are not even close to one.

Also until money is moved from short term Treasuries which are at terrifyingly low yields that indicate a huge problem is still overhanging the markets, the sidelines will continue to remain a very crowded place to sit. The range is still intact and the volume less than inspiring.

2008 Nov 14 10:39 PM