Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stocks Bear Market Rally, Examining the Facts

Stock-Markets / Stocks Bear Market Jul 11, 2009 - 12:43 PM GMT

By: Sy_Harding

Stock-Markets

Best Financial Markets Analysis ArticleIn the section of his annual letter to his stock-holders explaining why their stock plunged 32% last year, Warren Buffett said, “I did some dumb things in 2008. . . . . sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action.”
Buffett doesn’t often get caught up in the problems that foil ordinary investors.


What is known in studies of human psychology as the ‘status quo bias’ is sometimes one of those problems. We humans dislike change, especially dislike having our minds changed, and usually wage an internal fight against it. When new facts are revealed that challenge our existing convictions the natural response is to reject the information as probably untrue, to accept only information that supports our current view - as in the age-old joke, “Don’t bother me with facts, my mind is made up.”

The facts certainly seem to be challenging the recent prevailing wisdom that the economy is already bottoming and will be recovering in the second half of the year. But prevailing wisdom is only slowly responding to those changing facts.

Friday a week ago the Labor Department reported 457,000 more jobs were lost in June, considerably higher than the 350,000 forecast, and a considerably faster pace of losses than May’s 322,000 jobs lost. Wall Street analysts were shocked, but only for a few hours, before responding with opinions that the report actually indicated we are near a bottom for job losses.

When June retail sales were reported on Thursday this week, and the additional declines in same-store sales were substantial, indicating that consumers are still cutting back, Wall Street spokesmen gulped and paused for only a few minutes before telling us that June sales aren’t important anyway, that what will count will be back-to-school sales in a couple of months, and they will be encouraging. The stock market actually closed up some on Thursday.

On Friday this week the University of Michigan released its Consumer Confidence Index, and it fell from 70.8 in June to 64.6 this month, another indication that the retrenching of consumers will not be even ending anytime soon, let alone reversing. Investors and traders didn’t seem to be unduly concerned, even though the hope for a quick economic recovery is based on consumer spending coming to the rescue. The stock market closed mixed, the blue chips down fractionally, and the speculative issues of the Nasdaq up fractionally for the day.

Yet some of those who led the cheerleading a few months ago that resulted in the bullish expectations that the recession is already ending are allowing the latest facts to cause them to re-examine their previous thinking.

Warren Buffett is probably one of the most prominent, all over the tube lately with remarks like “the economy is falling off a cliff”. “the economy will be in shambles this year and probably well beyond.”

The President, Treasury Secretary, and Fed Chairman are all toning down their previous optimistic remarks, which had also helped move prevailing wisdom past justified relief that the economy will not plunge into the next Great Depression, all the way to the opposite extreme of believing that the Great Recession is already ending.

Yet, while the market has been slowly drifting lower over the last few weeks, it seems very reluctant to allow facts to change its mind and factor out of stock prices its conviction that good times are only a couple of quarters away.

In February I said the prevailing wisdom had become far too pessimistic, and in the process had driven the market down to the most extreme oversold condition we had ever seen. I predicted one of the biggest bear market rallies ever would begin from those conditions and moved my subscribers from 70% cash to 70% invested within one day of the March low.

However, I also predicted it would still only be a bear market rally; that the market would return to the downside during the summer months, and that the easiest way to make profits would again be from downside positioning.

While I will be willing to re-examine my thinking if the facts or conditions change, I have certainly seen nothing in the latest economic reports to disabuse me of that expectation. I don’t expect the next buying opportunity to arrive until the September/November time-frame. By then - and it is only three or four months from now - perhaps the market will be able to look six to nine months out and legitimately see the economy actually bottomed and recovering next summer.

Sy Harding publishes the financial website www.StreetSmartReport.com and a free daily market blog at www.SyHardingblog.com.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in