why Bernie Schaeffer thinks this rally is not real
I say when CNBC is off the air, when at least a few brokerage houses are killed, when a some of your best friends curse the word "stock" for fear their wives will leave them for a carnival operator
Schaeffer:
Why, in a nutshell, do I not believe that October 10, 2002 marked "the bottom?" For reasons very similar to why I disbelieved September 21, 2001 and July 24, 2002. Way too much hope, way too high earnings growth estimates, way too many risks to the economy, combined with way too ugly technicals. Regarding "capitulation" and "climactic selling," there is no reason that a bear market must end in such a fashion. In fact, the bear markets that ended in 1982 and 1990 each drifted into their bottoms very inauspiciously. And not many are aware that the 1987 market actually double-bottomed in December, probably because that bottom was also very un-climactic. But if in fact we are going to get a full-fledged climactic bottom to this bear market, the October 10 bottom was a pitiful excuse for one. In fact, the sequence of VIX peaks at the September 2001, July 2002, and October 2002 bottoms of 57, 56 and 50, respectively, belies the notion that this latest bottom was climactic and capitulative.
Might I be wrong and this was the bottom and we're off to the races in a new bull market? Yes. In this regard, watch the 9000 level on the INDU. There is not only heavy price resistance there, but it is also the site of the 80-month moving average. If this level is taken out decisively, the bear market may be over or at least on hiatus.
- Bernie Schaeffer |
