Barton Biggs of Traxis Partners, according to the Financial Times, said: “I have no idea when the next bull market starts, but I do think we are setting up for the mother of all bear market rallies.” He elucidates this viewpoint as follows:
 

• “Stocks around the world are very cheap.”
• “Stock markets have been obliterated and are deeply oversold.”
• “The fabric for economic healing is developing.”
• “We must be pretty close to maximum bearishness.”

On the last bullet, Investors Intelligence points out that its sentiment indicator has improved from its historical mid-October low of -32.2% (i.e. percentage bearish advisors less percentage bullish advisors) to -15.1% - still signaling low risk to accumulate shares.

Another important development regarding sentiment is the fact that the CBOE Volatility Index (VIX) is threatening to drop below its 50-day moving average for the first time in almost three months. Given the inverse relationship between the VIX and stocks, this is good news for equity bulls.

Should the bullish seasonal tendencies hold true on this occasion, possible first targets are the November 4 highs of 9,625 for the Dow and 1,006 for the S&P 500. This will also result in both indices clearing their 50-day moving averages (see my post Does This Rally Have Legs? for a summary table of the key levels).

The question remains: have we seen an important turn to the upside? According to Richard Russell (Dow Theory Letters) we’ve had 10 90%-down days since September, followed by a 90% up-day on November 24. If the tide is in the process of turning up, we should now see a series of strong sessions. I will be keeping a close eye on market breadth in particular.

Although there is as yet little evidence that we are leaving the corpse of the bear behind (especially with fourth-quarter earnings disasters looming in January), it would appear that the nascent rally could have more steam left.

All that remains is to say a big thank you to my readers for your support and friendship and wish you a joyous Thanksgiving.