Bernanke argued in an academic paper that cutting rates in 1998 lead to the bubble of 2000. Thus, this is an unlikely scenario.
In 1990, when the Fed first cut on July 13, the market proceeded to fall another 20% before bottoming in October. In 2001, the Fed cut on January 3, the market rallied, topping out on January 30. The next day, the Fed cut again. The market then dropped to 43% below from the first rate cut to Oct 10, 2002. That seems a more likely outcome than the 1995 and 1998 rate cuts, which were on the cusp and well into the Bubble.
Yep, smaller caps just started trading water and nobody was ramping anything anymore. Volume breakouts faded away.
So far we've had nothing but a nice little pullback and much needed volatility to add some excitement to what's usually a slow/boring summer month. See attached pic and show me the evidence we're in a bear market/recession. The only thing I see is a reaction to the last high set in March of 2000. It's way too early to declare the bull market is over.
I think you will find that kind of thing becomes meaningless if things really fall apart. Even fundamentals become meaningless. I am amazed to hear talk of FIb retracement levels etc under the current market conditions, but then I don't regard this as a normal bull market correction having been through early 90's housing, Asian crisis etc. Silly me.
Agree that fundamentals are out the window when the margin calls start coming on a daily basis, but I think you'll find that technicals work much better when market is in panic mode...Note the high in the DJIA pullback bounce last week: http://www.briefing.com/common/images/content/pagecontent/InDepth/20070808153606DOWtarget2.jpg
I've been an active retail investor since 1985. The only time I pulled out was between 1999 and 2000, and when I started buying again in 2000, it was all gold and gold stocks, until 2003, when I started getting back into everything else. That was the only true bear market, so far. Everything else was a panic. This is a panic, IMO. Once it's over, it'll be remembered like LTCM is remembered. But years of down action and a bigtime recession, as in your typical bear market? Nah. This one's very close to being over. Just because of the random nature of things, we'll probably have to endure one or two more blowups somewhere, but as Ed Hart on FNN once observed, the most reliable economic cycle is the Presidential election cycle. No way we continue down into '08, especially the latter half.