B, The problem is, every bull thinks we are at the bottom. There has been no capitulation. A bit of minor re-allocation moves, but no fear. If you ask the average investor, even those who say they are now bearish, they will say that the market will always be the best place to invest over the long haul. In other words, they are not walking away saying, "never again." They are putting their money in cash and saying, "I hope I can buy Dell under par."
In that type of scenario, you will see many rallies, some powerful, such as the 270 point day. These rallies sucker bulls cash back in, and then the market goes back down. The point is, after a large drop in one day, we are now likely to see a lot of volatility that is really like running on a treadmill. Big up days followed by several smaller down days that wipe out all the up day's gains.
The most likely scenario, IMHO, is a move over 8000 again, quickly, then when everyone thinks it is safe to go back in the water, a slow, agonizing move to 4500. Of course, it could all happen in one day, but I don't think so. The Buy on Dips crowd has to see many false dawns to lose the maximum amount of their savings. It ain't a bear market if it doesn't hurt.
MB
|
