Still Bullish on This 'Bear Market Rally'

The majority is wrong. It's usually wrong on the market, this is how markets work. This rally has been going on for three months alread, and all we hear is: "Bear market rally". Come on, guys, I understand, it's hard to sit on the sidelines (never mind being short) when the market is going up. But if you don't recognize the obvious, you lose money.

I expected some bullishness, if not exuberance, by now. I have been sitting on good gains since March, and my finger is itching to press the "sell" button. But there is no point in selling when there are so many bears around. Sentiment remains neutral to slightly bearing on my unscientific screen. And I remain bullish, buying more lately. All my transactions are on my blog, you are welcome to see them.

The end of the quarter remains the crucial point. There is some window dressing going on for sure. But most of it is on the oil market, which is so disconnected from the physical product now that even the price of natural gas doesn't want to follow it. No panic buying in tech and financials. Mostly sideways action with little upside. That's a "buy" signal, not a "sell", not even a "take profit" signal. Sure, if you feel scared sitting on 40% profit, take it. But I'm going to buy more. I don't have any stocks I like very much, so I was buying a little bit of this and that, with the exception of VMware (VMW). This one is one of the Next Great Things, and I'm buying more on weakness. My reasons are outlined here.

Full disclosure: At the time of publication author had a long position in VMW. Positions can change any time.

Comments

[Greyowl:]

I'm with you, Alex.

Of course, the problem is that the rally is going for three months already and the main gains are in our pockets. So, it's easy to challenge: "Get on the train, guys, it is not too late!" It may be too late or it is not that much left to go up.

We cannot predict the market.

Jun 16 08:41 AM

[raylndn:]

Great article on the reality of this market. It has been straight up and is supported by the fed and the banks who are using all that bailout money to buy cheap stocks. This sell off was not based upon valuation. It was a forced liquidation. There were amazing bargains to be had following this huge crash. I am of the opinion that the easy money has been made and it will get difficult from here. I will be a hold and hope from this point and hopefully it is sideways to up with no great opportunity for those left behind to get a "do over". Time will answer the question.

Jun 16 08:50 AM

[Larry House:]

I know I am always preaching caution in this market, but the trend is still in tact, I have been long since early March, and I continue to be. I think this rally can go further, even though I don't trust it. How can anyone trust the market after what we have been through the past many months? The trend is your friend, but watch carefully and have downside protection and an upside exit point. This is no time to overstay one's welcome.

Jun 16 10:10 AM

[thiazole:]

The market could easily correct at any time, but it doesn't have to. After the huge market crash of 1974 (almost as bad as this one), it took 8 months of nosebleed inducing climbing before the market finally corrected. The market is always a bet on the future. The current stance is that things will continue to get better. If we have a slump in the economic data, the market will correct. If it continues to get better, the market will continue to climb.
In 1975, the economic data kept up the pace it needed to maintain the climb. I think in the end, it may have been inflation getting out of hand again that finally triggered the correction.


On Jun 16 08:41 AM Greyowl wrote:

> I'm with you, Alex.
>
> Of course, the problem is that the rally is going for three months
> already and the main gains are in our pockets. So, it's easy to challenge:
> "Get on the train, guys, it is not too late!" It may be too late
> or it is not that much left to go up.
>
> We cannot predict the market.

Jun 16 10:12 AM

[drewriders:]

I don't agree. I got out with my 40% gain because I don't see much upside to this market. It is easy to say 'jump in' when you are sitting on gains. I would not commit new money to this market right now.
Everyone keeps looking at the historical charts to make themselves
believe we are approaching a V shaped recovery and I am not convinced. The market does what it wants and all the cheerleading in the world won't change that. I still expect a good size pull back this year.

Good luck to those who jump in.

Jun 16 10:15 AM

[jeandit75:]

Its funny how every blogger got long early March. Bravo Larry!

Jun 16 03:33 PM

[Greyowl:]

Nice to see you again, thiazole! :-)

I surely hope you're right - I sold off most pf my shares last Thursday, but it was too tempting to get in with the market down - I have been buying today and yesterday.

On Jun 16 10:12 AM thiazole wrote:

> The market could easily correct at any time, but it doesn't have
> to. After the huge market crash of 1974 (almost as bad as this one),
> it took 8 months of nosebleed inducing climbing before the market
> finally corrected. The market is always a bet on the future. The
> current stance is that things will continue to get better. If we
> have a slump in the economic data, the market will correct. If it
> continues to get better, the market will continue to climb.
> In 1975, the economic data kept up the pace it needed to maintain
> the climb. I think in the end, it may have been inflation getting
> out of hand again that finally triggered the correction.

Jun 16 04:12 PM

[User 344233:]

And now after two punishing days, and I imagine many more to come in the very near future you will be wishing you hit that Sell button. Perhaps you will wait until the gains ("I have been sitting on good gains since March") go away to hit that sell button. Buy high, sell low!

Jun 16 04:21 PM

[speeddaimon:]

Jeandit,

I typically have the same feelings about bloggers who claim omnipotence about the market bottom. So, because I am completely cynical and untrusting I went back through Larry's comment stream, and, much to my amazement, history actually backs up his claims. From the end of February thru about March 19th, he mentioned hating stocks, the market, macro variables, etc, but also talked about buying at that point because he invests on a "ten year horizon". So, while I still don't trust 99.9% of the people that claim they were buyers, Larry seems to be the exception to my rule.


On Jun 16 03:33 PM jeandit75 wrote:

> Its funny how every blogger got long early March. Bravo Larry!

Jun 16 04:30 PM

[thiazole:]

That little piece of industrial production data that came out today was actually the kind of economic data that can trigger a correction, so I suspect that there is a good chance that we are actually in the middle of a correction. If that is the case, I think the market will take 10% off the table before resuming the climb. I'm personally not worried enough about this correction to sell (the amount of money I'll save selling long term next year would likely offset the extra short term capital gains of trying to time a correction, not to mention the inherent risk of trying to time small changes like this).


On Jun 16 04:12 PM Greyowl wrote:

> Nice to see you again, thiazole! :-)
>
> I surely hope you're right - I sold off most pf my shares last Thursday,
> but it was too tempting to get in with the market down - I have been
> buying today and yesterday.
>
> On Jun 16 10:12 AM thiazole wrote:

Jun 16 05:26 PM

[Alex Filonov:]

Thanks everybody for comments.

Article was published in my blog last Thursday. A little bit longish lag, I could've changed my opinion since. I haven't. But this delay by editors was unfortunate, a lot can change on the market in 3 business days.

Jun 16 11:37 PM

[David Van K...:]

Alex, Avoid the delays. Don't depend on SA's editors to pick up your articles from your blog. Submit them directly if you are truly trying to help SA readers with your insights.

Jun 17 09:46 AM

[carey_jim:]

Trying to beat the market by noticing that the best analysts in the business consistently under perform market averages, is called contrarian investing.

It doesn't work either.

Jun 17 02:41 PM

[Old Trader:]

"But most of it is on the oil market, which is so disconnected from the physical product now that even the price of natural gas doesn't want to follow it."

Alex, there are some fundamental differences between oil and NG, mainly that NG is a "stranded asset", meaning its not readily shipped anywhere its needed/wanted. (Note; LNG addresses this, but is thus far a small part of the NG market). Here, in the US, there's currently a large surplus of gas, so naturally, the price is low and will remain low, unless the Gulf gets clobbered by hurricanes and/or we have a harsh winter.

Aside from that, although I'm sure there are undervalued stocks available at current levels, I'm equally sure I won't be "buying the market" at these levels.

Jun 17 07:25 PM

[Fred Voetsch:]

Alex, you seem pretty smart for a young guy. I think if you'd quite listening to and quoting Cramer the criminal (you have seen Jon Stewart's interview with him, haven't you?) you'd do much better.

May I suggest Richard Russell? A top Dow Theory guy and his age adds a lot of value to his feel for the market.

Jun 17 08:08 PM