The illusion of gain:
copied from bearforum .com
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The Illusion of Gain
Posted By: Tommy Bear
Date: Thursday, 18 January 2001, at 3:34 p.m.
From the Jan. 4th peak registered less than a full trading day following the Fed's surprise easing move, let's see how the major indexes have fared these past ten trading sessions. In fact, to show the huge returns in their best possible light, let's use today's intraday highs for each major index. Judging from the bullish psychology dominating bulls and bears alike, there is no doubt this calculation will show how very powerful the follow through rally has been and, no doubt, will confirm that the raging bull market, with the prospects of new highs or even Nasdaq 20,000 just in front of us, has resumed in all its past glory.
Let's see, the Dow is down 2.64% (from 11028 to 10737), the SPX is up .22% (from 1350 to 1353) and the NDX is up 4.40% (from 2547 to 2659). An investment portfolio that has one third in each would have netted you a gain of nearly two-thirds of one percent, but only had you sold exactly at today's intraday high (through 3:00 p.m.).
Just wait, you say? The move up isn't done? Well, that could be true. In fact, the pattern of the NDX, which seems to be in a rising diagonal (which is a very bearish pattern), would look more complete with higher highs than have been achieved so far.
In any event, I would think that ANY follow through rally which occurs just after the boldest easing move in history should EASILY be able to achieve net gains at a faster pace than "two thirds of one percent in two weeks". That means the rally is just getting started, right? I mean, think of the alternative. With the number of bulls and bears that have taken significant long positions during these past two weeks, and with the number of bears who have covered shorts and therefore are no longer around to support this market if it plunges, the Fed had better hope to God this strategy works, because, if it doesn't . . . well, you know the rest of the story.
Tommy Bear |
