The bear market will be ended not by capitulative selling, but by capitulative buying.
The bull market was killed by greedy longs. Just as assuredly, the bear market will be killed by greedy shorts. The upturn, when it comes, will be explosive for two reasons:
1. There is a lot of cash sitting on the sidelines
2. Bears will be running to cover their short positions, forcing prices up higher.
I am not saying that this will happen tomorrow, next week, or next month. But it WILL happen relatively soon -- within a few months.
The end of the bear market will be triggered by a combination of things -- an end to Fed rate hikes, higher unemployment, lower PPI and CPI numbers, and statements made by influential analysts that technology stocks are now significantly undervalued.
Mathematically speaking, the bear market will not last very long, because stocks can only drop so much before they are below book value. The decline has been so sharp, so fast, that I am optimistic we will see the end of the bear market after a few months of sideways trading.
The rebound will be so explosive, and so many shorts will be forced to cover, that a new term -- capitulative buying --- will be coined. |
