Larry Dudash et al.: But seriously....
There ARE fundamental reasons for believing that the overall trend for 2002 will be bullish rather than bearish and will require changing one's investing mindset.
1. Smart Money Index continues to rise.
2. From recent Barron's interview with Ed Hyman and Nancy Lazar, the top-rated Wall St. economists: they predict that the economic rebound will start "in a matter of weeks, and by the end of next year would produce a 3.2% rate of growth in the real GDP."
3. Hyman/Lazar also point to an interesting study in the same Baron's interview, a study which points out that the S&P is typically up 26% before a recession ends (we are currently up 18%) and THEN moves up an additional 16% within the next 7 months after the recession is declared over.
4. The percentage of stocks now trading above the 200-dma on the NYSE has increased from 20% (9/21/01) to 50%, which says that 1/2 of all stocks on the NYSE are already in an acknowledged bullish pattern.
5. Nasdaq has cleared its 200-dma for the second time in two weeks, both times on decent volume.
6. CBOE Market Volatility Index (VIX) "40-20" rule (Courtesy of Wm. O'Neill of IBD): over the last 15 years, in every instance that the VIX has moved above the 40 level (as it did in September), the market has never experienced a significant correction until if falls below 20.
7. Bullish sentiment is NOT excessive (forget the silly AARP survey) and the market continues to climb the proverbial "wall of worry". Look at where the money is going to tell you that this is so. It is NOT going into aggressive or growth mutual funds. Rather, it is STILL going into mutual MMF's, CD's, value-oriented mutual funds, etc. The amount of money in conservative, "bomb-shelter" instruments continues to rise faster than mutual fund inflows. It now accounts for 4 trillion dollars which are earning next to nothing. This will eventually find its way into the market.
8. Interesting chart from David Orr of Wachovia showing that the difference between the CPI and PPI has increased from minus 1% to 3% (Nov.2001) over the past year. This is quite bullish and is a good indicator of profit margins in the coming year. Obviously, if the cost of goods is low and CPI is higher, this goes directly to the bottom line. The CPI/PPI difference has only reached 3% or greater 4 other times in the past 23 years, the last two occurring in late 1991 and late 1998, as we were ending the last two recessions. Implication: we are ending this one as well.
9. Finally, also from David Orr's work: the Inventory to Sales Ratio is 1.45, the lowest level it has been in the past decade, with a steady decline in the ratio over the last 7 years. No way we still have "excessive inventory".
Again, for those of you whose concept of the stock market does not extend beyond the Q (BRCD, BRCM, EMLX, QLGC, JNPR), this is meaningless. However, the technical indicators I listed in post #19377 and the above economic data should at least have all of you questioning whether we are still in a bear market. Steep corrections in overvalued tech stocks which have moved 100-200% over the past 3 months due to momentum players pushing them to unwarranted heights is an entirely different matter.
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