No disastrous news this morning, though no encouragement from Japan either.
After yesterday's dramatic turnaround (500 points bottom to top) and solid ending the market should be good for another solid up day. Will it be another one-/two-day wonder or something more substantial? I was kind of surprised by the lack of conviction on the sellers' part yesterday; perhaps this is more than a dead-cat bounce. It seems that some people are prepared to become exuberant again. On the other hand, more and more analysts from top institutions are prepared to talk about Dow 4000 or Dow 5000, 50 % correction in the media as a real possibility. Since most new investors are still in denial that this could ever happen, that should give them some food for thought.
Bill: I think that you are a bit premature in calling it off, even for the moment. There was a similar significant drop and recovery in 87 and we are still very much following the 29 pattern before the first sharp drop. I personally don't take historical comparisons too seriously, but they at least show you the sort of things that may happen. This market can turn south again on a moment's notice. I also don't think that one can compare the present situation to the 97 mini-plunge. Monday/Tuesday morning was not a capitulation and we are now in a bear market. While you don't need crashes in a bear market, they have a much higher probability in a bear market, in particular in a bubble like the present (Ms Cohen: undervalued stock market??? I don't think you would pass economics I again). My puts are still doing fine, thanks for the concern, I got them pretty cheap, and I am certainly not selling them yet.
As far as oversold conditions are concerned, one needs to keep in mind that it is overselling that causes crashes.
Good trading to all,
Phil |
