The End of the Bear Market

Unfortunately I didn't post this in the morning when I emailed it out to some people otherwise I would look like a genius calling it before such a large rally(not that it helped me any, see previous post). ;-) Anyways, this is a graph of the 20 week and 40 week moving averages on the S&P 500. If you go back over the past century, when these cross it signals a change in market cycles. There have only been a few false signals but when the 20 crosses below the 40 it signals the start of a bear market, and when the 20 crosses back above the 40 it signals a new bull market cycle. As we can see we have the 20 crossing back over the 40 finally a few days ago. I assume a lot of others see this as well and is one of the reasons we have rallied so much recently.

Regardless of your own personal viewpoint this is a bullish signal and points to higher stock prices so dips should be bought from here on out. My personal viewpoint is that we are still in a very weak economy that isn't improving much however we have had better than expected earnings even if a lot of it has simply been due to cost controls. Again the market trades on psychology and looks forward so even with the current reality we may see the S&P hit 1,050 or whatever target GS has on it because people are willing to pay up for stocks until we reach that point. This means I may as well go along for the ride managing risk and buying dips as necessary until I am told otherwise by the market that sentiment has changed. I am looking to ride the market down until the re-test of 955 then will get long biased again.

Remember that regardless of what any pundit says or what I think or say the market will show the way and it is showing that it wants to go higher at the moment. I will look to get in after we work off this extreme overbought condition and likely get long mostly commodities and energy and metals.

Total Return for 2009: 145%