Copied from my Motley Fool CAPS blog....
Look at the “percentage gained” over this 6-week rally and see if you notice a trend…
Week of: Start End Points Percentage
13-Apr-09 856.91 869.6 12.69 1.48%
6-Apr-09 839.75 856.91 17.16 2.04%
30-Mar-09 832.98 845.61 12.63 1.52%
23-Mar-09 803.24 832.98 29.74 3.70%
16-Mar-09 758.29 803.24 44.95 5.93%
9-Mar-09 680.76 758.29 77.53 11.39%
Gains have been getting weaker and weaker. Most of this rally all took place in the first 2 weeks.
Also some must view links for this upcoming week:
1. Percentage of stocks above the 50-day moving average, multi-YEAR high:
http://stockcharts.com/h-sc/ui?s=$SPXA50R&p=W&yr=3&mn=0&dy=0&id=p24812634319
2. Retail is now OFF THE CHARTS bullish because we eeked out another measly 1% rally on the week.
http://www.sentimentrader.com/
3. Put-Call ratio is 0.56, multi-year low. Traders are gorged with calls…
http://stockcharts.com/h-sc/ui?s=$CPCE&p=D&yr=1&mn=0&dy=0&id=p79337359546
4. Since the rally started on March 9th, there have only been three 2-day corrections and ZERO 3-day corrections. A big run up with no pullback lead to “weak longs” and the longer the rally goes on the more momentum, non value driven, short term traders get on board. These traders are fickle.
Although I cannot tell you the day this bear market rally ends, I can tell you that we will wipe out all of the piddly gains over the last 3 weeks of this rally in just a few trading sessions, what happens after that is more up in the air.
Richard Russell: The scariest declines in bear markets are typically the ones when investors think they are making progress and recovering their losses, only to see stocks go into a new free-fall.
“That cycle of decline, followed by hope, followed by fresh losses, is really what ultimately puts a final low in place. The final decline of a bear market tends to be based on “revulsion” – a growing impatience among investors who conclude that stocks are simply bad investments, that the economy will continue to languish, and that nothing will work to help it recover. Revulsion is not based so much on fear or panic, but instead on despair and disillusionment. In a very real sense, investors abandon stocks at the end of a bear market because stocks have repeatedly proved themselves to be unreliable and disappointing.”
Good analogy for what is going to happen to this rally below:
http://www.youtube.com/watch?v=uHz2xCV64n8
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Your post explains what I put forth in my other post with clear data points. However, as we all know, sometimes these things can keep going up regardless.
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