OVER BEREN EN STIEREN…

7 februari, 2010 | door MHAAGEN |

SmallCapNetwork doet zijn duit in het zakje en stelt de opninie van de beren en de stieren tegenover mekaar.  Als maatstaf wordt de S&P 500 genomen, een zeer brede index met de 500 grootste bedrijven van de States.  Dan geeft het zijn eigen mening over de markt : ze leunen toch meer naar…de beren.  Wie heeft gelijk ? Weet u het ? Vertel het ons dan, graag !

Was Friday the Bottom?

That’s a great question, isn’t it? Both sides of the table have some pretty valid arguments that their outlook is the right one. So, before we make a judgment, let’s just clarify what’s bullish and bearish about the market right now. 

What the Bulls Say 

The S&P 500 dropped 53 points between Thursday’s high and Friday’s low (a whopping 4.8% swing in about a day and half), which definitely tests the bounds of how fast and far an index can drop before rebound-speculation starts to push stocks upward again. The bulls would suggest the size of that swing could also hint of a mini-capitulation… sort of the final, painful blow that’s necessary to wipe the slate clean and let the buying begin again. 

All told, the pullback from the mid-January peak of 1150 to Friday’s low of 1044 is – so far - a 9.7% correction, which is more than enough to bleed off the market’s excess and froth that’s been building since March. 

The bullish proponents would also point out how the VIX reached its upper Bollinger band on Friday, and then fall back to a relatively low close. That too indicates a sort of capitulatory spike and ebb in fear that tends to coincide with bottoms, which as you can see has happened a few times since September. 

What the Bears Say 

The bears acknowledge - perhaps even concede - everything the bulls are saying. They’ll just point out that though the 9.7% pullback from the January high is a fairly serious one, it’s still not quite big enough to readjust attitudes into something a little less euphoric. It was a blow to be sure, but confidence is still a little too high. Something closer to a 15% dip would do the job, and be a more typical correction. 

To really hit a good (i.e. more permanent) bottom, more traders and investors need to be convinced that a bottom has not been hit yet… the majority of the market’s participants need to be more certain that stocks can’t possibly go higher right now. Yes, it feels like backwards logic, but it’s a school of thought called contrarianism – and it’s right more often than wrong. 

The bears would also point out this reversal action seems a little too easy and too convenient for the bulls. Near-perfect hammer reversals for the indices? Rebounds that occurred right as the next-to-last set of support levels were touched? The market doesn’t make things quite that easy. Oh, it offers clues…. just not clues this obvious. Something’s fishy. 

What We Say 

Though our contention is that stocks are closer to a bottom than not, we’re actually more in the bearish camp right now than the bullish camp. Said another way, we’re still bearish until it’s clear and proven that the bulls are right. Too many people found too much confidence too quickly on Friday, and none of the indices have made sustainable reversal shapes with their charts yet. So no, we don’t feel Friday was the bottom. 

Our outlook remains the same…. a dip to the 1020-ish area is not only the most likely outcome, but would also be a much healthier (and plausible) correction for the long-term bull trend. 

Of course, how often does the market do the healthy thing?

Tot daar het stuk.  Mijn mening ? De beren hebben het bij het rechte eind…