Gary,
your points are well taken, and are correct from a technical analysis point of view. I'm certainly not a technical analysis expert, for instance I don't know whether Dow theory has ever given a false signal; I respect the technicals, but my study of previous bear markets has several fundamental factors that have always been present going into bear markets:
1) Rising interest rates--
2)Inflation
3)Decreased money supply
4)Overvalued stocks
5)Rapid economic growth
While the S&P downgrade may cause an increase in credit card, mortgage, and auto loan interest, I doubt it will have enough of an impact to throw us into bear territiry. I see no signs of inflation, especially in view of the decrease in oil prices. I anticipate QE3, I think stocks are getting very cheap, especially with this pullback. ASnd lastly, I see no signs of an overheated economy.
So, obviously something has to give. Do we get all the way to a 20% pullback in the major indices? Possibly. However, I think almost all the bad news has been priced into the market. I believe we get one or two more pushes down, then a large rally to the upside. I think those buying near the bottom, just like in 2009, will be rewarded handsomely. |
