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To: mishedlo who wrote (137806)	12/8/2001 3:56:37 PM
From: Crimson Ghost	Respond to of 436258

SO WHAT IF NEXT BULL MARKET IS STILL SOMEWHERE IN THE FUTURE? Dec.7, 2001. Given the market’s substantial rally since it plunged to a new bear market low in September, and the excitement that rally is finally beginning to generate, it might be a good idea to put the situation in perspective again. The Dow has gained 22% and the Nasdaq 44% since the September low. That certainly is exciting, since it would be a big gain for a full year, even in a bull market. And it’s interesting that it began just as we told you all summer to expect “from a new bear-market low that should take place in the October-November time frame”. It’s also interesting that on the charts the current rally looks almost identical to the excellent April-May rally last spring, which took place in the final months of last year’s favorable seasonal period (which runs roughly from October to May), and after the market had plunged to a new bear market low in March. The spring rally was on hopes that better than expected economic numbers at the time were forecasting that the economy would be recovering by this fall. But while predicting the rally that would be well worth trading, I cautioned you that it would turn out to be another bear market rally from which profits would have to be taken quickly in anticipation of a plunge to yet a lower bear-market low in October. Now the current rally is taking place just as enthusiastically in anticipation of an economic recovery beginning by the first quarter of next year. And it also has been supported by previously gloomy economic news that has begun to have some real bright spots, like a rebound in consumer confidence, higher than expected home and auto sales, and a big plunge in energy costs. However, also similar to the rally in the spring, the Labor Department has now dashed a fair sized bucket of water on the improving outlook. On Friday it reported that non-farm jobs plunged another 331,000 in November, a much larger drop than economists expected, and the unemployment rate jumped to 5.7%. Just as disheartening, the previously announced jobs numbers for October were revised sharply downward to show that 468,000 jobs disappeared in October. The report crushed hopes that the layoff and unemployment situation is improving, and since the jobs picture is probably the biggest factor in consumer confidence, should cut a good sized chunk out of confidence that the economy will be in an upswing early next year. Stepping back to look at the bigger picture, in spite of the excitement the rally is generating, on a buy and hold basis the S&P 500 is still down 12% for the year to date, and down 24% from its peak of early last year. The Nasdaq is still down 18% for the year to date, and still 60% below its peak in 2000. And Friday’s jobs report is a reminder that there is no assurance that the economy is on the mend, and therefore no assurance that the bear market for stocks has ended. Meanwhile, with the quickness of the rally having the market already short-term overbought, and investor sentiment having reversed to a high level of optimism from the extreme pessimism that was in place at the September low, I agree with those analysts who see the rally as having gotten temporarily ahead of itself and at risk of a pullback of some degree. And now it has a potential catalyst for that in Friday’s employment report. However, last May when that rally became overbought and at risk, the market was simultaneously leaving its favorable seasonal period and entering its usually unfavorable period of May to October. But as this rally has become overbought and at risk, the market remains in its favorable seasonal period for several more months, and is only short-term overbought, while our intermediate-term technical indicators remain on their buy signal of October 3. So I think the odds are good that any pullback that develops will be temporary. But yet it would probably be a good idea to postpone taking any new positions for now until the short-term situation sorts itself out. Meanwhile, it’s been another exceptional year for market-timing, as well as for a seasonal strategy. Not even counting the exceptional opportunities for making gains from the downside by selling short or buying bear-type mutual funds designed to make money in down markets, there have been two significant rallies again this year, in each of which the S&P 500 gained roughly 20% and the Nasdaq more than 40%. So although the next bull market may still lie somewhere in the future, with these kinds of rallies who needs it? Bears can be friendly too. Sy Harding is president of Asset Management Research Corp., publisher of The Street Smart Report Online at WWW.StreetSmartReport.com, and author of 1999's Riding the Bear - How to Prosper in the Coming Bear Market.