I don't know whether the Dow is high now. That would depend on the time frame. The argument could be made that from a historical perspective, it remains high. Look at a 10-year monthly chart. And then consider "deteriorating" business conditions.
A June 10, 2000, Barrons interview of Richard Russell by Peter Du Bois with Richard Russell comes to mind:
Q: You've written that in major declines, big industrial blue chips, the Dow-30-type stocks, usually are the last to really crack. Why is that?
A: First, investors just hate to part with them. They don't believe big blue chips also can collapse.
Also this:
Q: What are the other two stages of a bear market?
A: In the second stage, business conditions really start to deteriorate. Stocks go down further as they discount this climate. Corporate profits decline, and the effects of the battering stocks have taken so far is reflected in corporate earnings. For this reason, the public relates much more to what's happening in the second phase, and optimism begins to turn to questioning and even gloom. This usually is the longest phase. It's when the public finally really realizes that something is wrong. Stage Three is the "give up" phase. Rhea said that's when people who are saving for a rainy day find that it's raining.
I'm not saying the market can't rally strongly from here. I'm saying there are charts that would seem to suggest that investors should be cautious. We certainly haven't reached the "give up" phase. Far from it, judging from all the lingering exuberance and the predictions of imminent rallies. Everyone's eager to see a bottom and buy. At the end of this bear market, they won't be eager to buy anything -- or so say those who know something about bear markets (which doesn't include me).
The rallies I look forward to from time to time are in the short term. As for a strong summer rally, I have no idea. Looking at monthly charts, one wonders (with some skepticism). And looking at the fundamentals and the cloudy outlook, one wonders how the markets could rally strongly, but sentiment can change at any time. So who knows? I wouldn't be surprised if it went up or down. I'm not a firm believer that the market is heading anywhere I think it's headed. To me, that's the easiest way to lose money. The market ain't religion, and neither is TA. It isn't science, either. It's speculation. Plain and simple. The real gamblers will assure us otherwise, no doubt. It's a sure thing. Right. |
