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Equity Markets Will Be Higher By Year End

|Includes: SPDR Dow Jones Industrial Average ETF (DIA), EWJ, IWM, QQQ, SPY

It is said that the best time to by is when there is "blood in the streets" or "at the point of maximum pessimism". Well, given the shocking footage coming out of Japan and the carnage that has beset financial markets in Japan and the world at large, it could be argued that this point is now. 

But are investors "walking into the pit" to buy? From what I can gather after listening to all the banter coming from the press of popular opinion it appears that few if any are stepping into the ring. This tells us something about the underlying condition of the market.

A top in the market is characterized by the insistence of bulls not to throw in the towel with any weakness. A market top is a process not a point. If we go back in time and look at all market tops they are characterized by chart patterns like  double tops, triple tops, head and shoulders etc not inverted "V" shapes. 

Ever since this bull market got into gear in March 2009 it has been characterized by a general reluctance of the crowd to believe in equity prices moving higher. Every bearish excuse for equities not to go higher has been thrown at the market yet it has moved dramatically higher. I have said on many occasions before that "this has been the most hated rally in market history" and that "the bulls are not genuine for the first sign of trouble they jump ship". 

This sort of fleeting behavior by the bulls  is not what is normally seen at the beginning of a major decline. Rather it has all the markings of a normal bull market. Until I see evidence of a change in the underlying condition of this market I continue to see any weakness as a buying opportunity.

It is not the easiest thing in the world saying this in the light of Dow and Nikkei Futures being down some 280 points and 1,100 points respectively at time of writing but I believe in my process and I refuse to sit on the fence.




Disclosure: I am long DIA, EWJ.