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A Case for the Bulls?


Three benchmarks are at hand - but we may still face years of chronic underperformance, undervaluation.

There's a case being made that there's a better-than-average likelihood that the more-than-30% rally in 6 weeks by the S&P through last Friday marks a first leg up as opposed to another bear leg. Why?

Well, relative to precedents established during the Great Depression, the last 2-month leg down in the S&P into March 6 is the second shallowest and briefest. At the same time, the current retrace has gained more in percentage terms than any of its 1930 predecessors.

However, if the secular bear runs 13 to 14 years counting from 2000, that means that even if a price low has been seen, there could be years of chronic underperformance and undervaluation - even if one were to assume that stocks represented "value" in April 2009.

Cyclically, 3 important benchmarks are at hand:

  • The mid-April rally high in 1930 post mid-November crash low in 1929.

  • The early June anniversary of the great 60-year cycle, which in 1949, marked the beginning of the Great Bull Market into 1966.

  • The anniversary of the birth of the NYSE on May 17 (note the pre-crash peak on May 19, 2008).
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No positions in stocks mentioned.

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