>> No I don't. Like i posted a few times back in August, this market has really lost its appetite for risk-taking. And now with these dismal earnings fundamentals we are looking at, that kind of a nasdaq rise would require big risk-taking by investors. The market's gullibility for story stocks and "visionary" personalities is largely gone, imo. <<
Ahh, but it's just this kind of negativity that can make for a vicious rally. You know why? Let's say the Fed cuts, and we get another kind of rally like we had when he made his speech the other day. Well the shorts think it's business as usual. Nice rally to short even more stock. But then, the market doesn't immediately fail like it has so many times lately after a 2 or 3 day rally. Maybe it pulls back to suck in some more shorts, but then real buyers emerge again and shorts are knocked back on their heels.
It's that second wave of short selling after the first rally that can provide the fuel for the next leg up when it finally doesn't go the shorts way and stay down. Then you add some mo-mo guys who jump in because it breaks a couple of resistance levels on the upside and that's how a good old fashioned sustainable rally lasts. Every time you get another earnings warning people will shrug it off and say so what. I've got the Fed on my side now. There aren't any more tax loss sellers to pummel me. Companies have recognized the slowdown and are cutting costs so it will be easier for them to make the numbers. There is always a period after a debacle like this where everyone thinks if they just tighten up their belt a little and the Fed eases we can survive this downturn. That will fuel stock prices higher. Furthermore, you will have the situation where this bear market weeds out all the weaker players. All those incremental dollars that were being thrown at worthless IPO's won't attract money any more. So there will not be as many stocks to bull up this time around. Money that used to go to CMGI, ICGE, INSP or whatever can be focused on the few players that are still standing. Money that used to have to be divided up between all sorts of these new startups will be redirected towards the big safe dominant players. That's how you can get a nice rally in the averages with lots of money going after big caps. Many little companies without a viable business will not be taken up on this rally. Just makes my large caps do even better, so fine with me.
Don't underestimate the power of the bulls who want one last rally to fleece the public some more and sell out the last of their holdings. It always happens. It happened in '29, in Japan in '89, in Hong Kong, and it will happen his time again. I am projecting a rally of at least 38% off the lows. I think we will have no problem seeing the Nasdaq above 3000 in the next couple months.
>> Why? I would not expect any rally of note before April or May. <<
Well I fundamentally disagree with you there. I think some people will get sucked in by April or May when it appears that a bottom is in place and they will end up taking on more risk by paying up. Better to buy now at lower prices than you're going to have to pay in April/May. |
