Irrational wave of optimism

[#1]

...has hit the yanks. Dj-ind has broken through 95000 resistance line. To those clinging on to shorts and gnashing their teeth - we might still have a couple of days worth of upside. 100000 will be the real test.

[john_1]

My view is that for a long time every bounce was viewed with disdain and quite obviously it was a question of hours not days as to when the down trend was renewed...As a result the bounce created little to no doubt in the minds of either the bulls (stay away) or the bears( stay short)..It needed a significant gain to create the kind of doubt the market needs....Now we find ourselves in a situation where many feel they may have missed the boat to go long and many shorts are regretful and doubtful that they will see a drop. When this has run its course. Both sides need to want to see it go back.(longs to buy shorts to exit. That's when we will see the test of the lows...OMO

[SimonPB]

a bear market rally can last weeks or even months.

[Wizard]

Johnny u got everything right except the second line where u say that the `long will buy shorts'. That effect will create even further upside. Pull backs will be there, but stick to your Longs and have a nice turkey with the Americans on Thanksgiving day! ;)

[Wizard]

That is exactly what I'm talking about

[_nova]

yes I also agree. In a bull market you have steady upside over time where news is priced in the market almost immediately. In a secular bear market you have almost the opposite effect where you get sudden drops, then euphoric spikes based on sentiment, followed by cautious upside. The difficulty in trading the bear is that it often ignores fundamentals in favour of sentiment. The reality, or rather secret, of a bear market and the primary trend is that you need to look 6 to 12 months ahead and ask the question: What will economic fundamentals look like 6 or 12 months from now?. When I look at it that way then there is little doubt in my mind that we're seeing a euphoric bear rally within a very strong and heavy secular bear

[Wizard]

Back in 2001 the Bear Market rally lasted full 6 months...

[#8]

in 6-12 months, the market will be pricing based on expected returns for subsequent periods, so really we need to take at least a 24-36 month view, if we want to project where prices are going to be 12 months from now. The question is, how far in advance is the market pricing right now?