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Are we in a bull or bear market? If you came to this article for an answer, forget about it. If you think you know the answer, forget about it. One of the challenges of trading the markets is not knowing the answer. For example, earlier this year Ben Bernanke of the Federal Reserve announced that the Fed was buying treasury securities, which to all stretches of the imagination would trigger a bull market in treasuries. Now then, if you jumped in and bet the farm, you are the proud owner of a huge losses as the treasury market fell out of bed during recent months.
This is not to say that we shouldn't do our research to determine in our minds where the market is going. There are those analysts who look at long-term trends lasting for several years and sometimes decades. These longer periods are called "secular" trends. Then we have others who look at shorter periods, which are often called. "cyclical" moves. The "cyclical" moves usually fall within the longer "secular" markets.
Neil Davis Research has studied the "secular bull and bear markets and found the bull runs often last form 6 to 24 years, while bear moves last 13 to 16 years." "Cyclical" moves often average 64% up or down, lasting up to one-and-a-half years.
The Dow has rebounded 34% from its March 9th low. The S&P rebounded nearly 40% from its low. A traditional definition of a bull market is a 20% rebound from the lows. Mr. Davis says that this rebound is a bull move, but he does not consider this a "secular" bull move. Rather he says its a rebound within a longer term bear market.
James Paulsen of Wells Capital Management is in the opposing camp. He holds that the U.S. economy is stronger than most people believe and is clearly in the bull camp.
So then, pick your poison -- bull or bear?
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Reader Comments (Page 1 of 1)
6-15-2009 @ 6:43PM
william lindblad said...
As in inflation/deflation, both will be prevalent. While this present situation is new in scope (size), it does have precedent. I think that it will be similar to the period from 1893-1910. A very bumpy road. If Jay Gould were alive today and had this media access he would be the richest man on earth.