SPY is up 18% in just 4 days (close to close). Since 1994 this is the BEST 4 day performance (I don't have the data going further back). How much upside could this move have before retracing at least 5%?
major ETFs 4 day performance: XLF +32% (record!, data only back to 1999) XLE +28% (record!, data only back to 1999) QQQQ +15% (only 6th best, data only back to 1999) SPY +18% (record!, data only back to 1993) this is insane! imagine somebody who used 4X leverage to short at the bottom, their accounts are GONE no matter what they shorted.
How Much Froth Left In The Market? the distance travelled to the downside was greater then expected by most, and I expect the distance to teh upside will comprise similar characteristics. If one considers the possibility that the last move down was a price excursion that exceeded a 'natural' price floor, and, that the move up thus far has only just brought prices back up to a 'natural' price floor, a premise can be made that the market has only just begun to trade up, and has significantly farther to go to the upside, regardless of the 'percentage move' it has moved. If anything, I would say that a lot of 'froth' was removed from the market.
IMO, the rearview mirror has to extend further back than that. We just went through a historical dump - for clues on how high this can pop - even assuming this remains a bear market - it would make sense to look at the aftermath of previous historical dumps. And most of those are pre-1994.
"investors should continue to remain highly defensive and give thanks for any market strength to sell into" This seems to be the conclusion of the article you mentioned. The last few days of positive market movement could simply be a pullback. I plan to remain defensive in gold. Even if the market does continue its uptrend, the retail sector is going to have a bloodbath this holiday season. Everyone I talk to is cutting back on holiday spending and retailers are already laying off employees and declaring bankruptcy. I am shorting the retail sector with inverse ETFs. http://news.yahoo.com/s/ap/20081127/ap_on_bi_ge/holiday_bust;_ylt=AvzP.jXagiHLq9sgx3ReyAZv24cA
Shortie: Good thread for various reasons (including that I am glad to see XLF at top, which is what we recommended on RFT's financialtrading blog the day it traded at the bottom!). Not only the direction of the call, but the vehicle was the best of the majors! I also think that it would be good to summarize a statistic of the top 10 down years (in pecentage). We would then know how far a rally might go up based on later statistic. Could someone do it?
http://www.hussmanfunds.com/wmc/wmc081027.htm the link has a chart of peak to bottom for various bear markets.