For those who missed my April 1, 2011 BNN rant describing the structure of the current global bull market in equities to be that of a rebound bull.
“A rebound bull is a bull market of short duration and great magnitude that typically follows a granddaddy bear market. The granddaddy bear is introduced by a crisis and is usually of long duration and great downside magnitude. There is no defense against the Granddaddy bear because like a financial tsunami, all stock asset classes swept away at the same time. There have only been three granddaddy bears over the past 40 years – the 1973-1974 Arab Oil embargo. The 1987 change in U.S. Fed policy bear and the 2007-2008 liquidity crisis. The bear of 2000-2002 was not a granddaddy but rather a sector crash (technology) with other sectors – financial and energy being unaffected.
The rebound bulls that followed each of the granddaddy bears were all similar in that they were short – no more that 24 months and they had great price magnitude, usually in the order of at least a two thirds retracement of the granddaddy bear. Rebound bulls are usually followed by a flat cooling off period – like a flat mini-bear if you will and when the cooling period ends the markets move on to new 52-week highs.
The best way to deal with the current mature rebound bull is to seek out stock sectors like the TSX Financial that are just emerging from the “cooling off” period.”
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3 comments:
Bill,
What do you see in the market right now? I see many stocks breaking or near breaking support. You mentioned before that an annual cycle usually has two peaks and a trough or vice versa. Does that mean we've hit one high already and it's straight down till the summer before a 4th quarter rally to complete the second peak?
Hi Shy Guy or Doll
We are into a period of sector rotation that has capital moving from high momentum plays (commodity sensitive) to low momentum plays and this could persist for a few months – about 10 to 14 weeks. The preferred places are technology (RIM) and some consumer plays. I see that iShares Canada have just introduced a new CDN Consumer Staples ETF (XST) just in time
Bill Carrigan
I noticed you did not mention that financials would be another place to move capital too. Especially for us non-sheep. As of now, what is your call on the banks short-term and throughout the summer?
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