With the Dow closing today above 23,000 technicians are calling this a new bull market. Really? I doubt it. I have traded through bear markets since 1974 and honestly technicians always call an end to the bear market on any major rallies.
The last great bear which was the second worst in history, the credit crisis, saw at least half a dozen excellent rallies and 3 times technicians said the bear market was over only to be wrong every time. Finally in March 2009 when that market plunged, analysts and investors felt it was the end of the world, but instead it was the end of the bear.
Investors can survive any bear market no matter how bad by not over leveraging themselves, staying with quality stocks that had come out of past bear markets repeatedly, keeping some cash back for those days when markets plunge again and following the trend. Right now the trend has been higher so follow that trend but don’t place additional capital in the market as it climbs. Instead take some profits, re-position from poor stocks to quality names and take a little cash back out. If the bear is back in his cave, which I think is doubtful, by being in quality names investors will still make profits if indeed this is a new bull market, as all stocks recover.
At this stage a lot of the rally looks driven by high liquidity from the Federal Reserve and other world banks, a lot of short covering and enthusiasm as more and more investors are drawn into stocks with the belief the worst is well behind us. It could very well be that the worst is behind us, but no analyst can tell any investor with certainty that we are now in a new bull market.
With the coronavirus continuing to spread, months still ahead with economies shut down and no vaccines, I would say analysts are just giving investors a “best guess scenario”.
Teddi Knight
Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk.