Saturday, April 4, 2009

Bear Market Rally : make hay while the sun shines

The current rally is looking more and more like a bear market rally.

This is even though my stand remains that the markets will bottom out between March ‘09 and Aug ‘09 and that what we see currently is a bottom formation happening.

Key reason why I think so :-

  • Per my estimates for a bottom, I was expecting another capitulation and retest of the Oct ‘08 lows. That has not happened yet.
  • Lot of negative news is yet to be factored in. These include:-
    • GM going bankrupt (or at least a very painful restructuring)
    • Banks like Citigroup getting fully nationalized and broken up into pieces
    • Far worse than expected corporate results for the March ‘09 quarter
    • Far worst than expected news on global macroeconomic scenario