Ralph Acampora thinks the worst of bear market is over

Discussion in 'Wall St. News' started by S2007S, May 9, 2009.

  1. S2007S

    S2007S

    This is like the millionth person to turn bullish after the fact the market is up almost 40%. WHEWWWW!!!!


    I dont know....




    Joining the bullish party



    Commentary: Dean of analysts thinks the worst of bear market is over
    By Howard Gold
    Last update: 7:56 p.m. EDT May 8, 2009



    NEW YORK (MarketWatch) -- A familiar figure clutched his lapel microphone in a packed church basement on Manhattan's Upper East Side earlier this week.
    Ralph Acampora, once the dean of Wall Street technical analysts, wasn't testifying to his own recovery from bearishness before unrepentant stock market junkies at the monthly meeting of the American Association of Individual Investors. But he was pointing to a major change in the market's direction.
    Acampora predicted the market would hit a "double bottom" last October -- which may already have happened - and now thinks the worst of the bear is over.
    "This market's on the move," he told the audience of baby boomers and retirees. "Something's going on."
    That something is a change of sentiment that's almost palpable. From more hopefulness about the economy to a sense, justified or not, that the worst of the banking crisis and housing collapse is behind us, the public's mood has swung from utter despair in early March to some hopefulness that at least things are getting worse more slowly.
    "I think people feel a little different," said Acampora.
    That and the market's huge move from its March lows have prodded him to take a bullish stance on stocks, though he stopped short of declaring a new bull market. His target is between 9,500 and 10,000 in the Dow Jones Industrial Average by the end of the year.
    Acampora joins a growing army of erstwhile bearish technicians and money managers who have gone to the bullish side over the last few months. Bernie Schaeffer, another well-known technician, has flagged a potentially major buy signal.


    As for Acampora, he's retired now but continues to teach. He held forth as Prudential Equity Group's top technical analyst from 1990 until the firm disbanded his department in late 2005. A co-founder of the Market Technicians Association, he worked at Kidder Peabody in the 1980s. Some of you might remember him as a panelist on Wall Street Week with Louis Rukeyser.
    The Acampora who spoke last night was pretty much the same Ralph I interviewed more than a decade ago for Barron's Online. Though in his late 60s, he hasn't changed much: He was animated, ebullient, and bullish again.
    Back then, he made a series of remarkable calls. In June 1995, with the Dow trading in the mid-4000s, he said it would hit 7,000. When it reached that level, he predicted it would get to 8,250. In March 1999 he said Dow 10,000 was in the bag. It surpassed all of those targets.
    Then Acampora got a bit carried away.
    "This could be the start of a 'mega-market' lasting 12-15 years, similar to the boom markets that followed the First and Second World Wars," he wrote in early 1999, and said the Dow could hit 18,500 by 2006.
    Oops. A little more than a year later, the Internet boom had gone bust, and we went through a horrible, 2 1/2-year bear market. Though the Dow did achieve an all-time closing high of 14,164.53 on October 9, 2007, it was comfortably below his target.
    That wasn't in the same league as James K. Glassman and Kevin Hassett's notorious Dow 36,000 prediction or Harry Dent's even more embarrassing Dow 40,000 call, but it wasn't Acampora's finest hour, either. Still, he was pretty upbeat and he warmed to the bullish case as he spoke.
    "For weeks the market's been overbought, and it keeps wanting to go higher. Everything's broadening out," he said.

    In particular, he mentioned the advance/decline line -- the number of advancing stocks vs. the number of declining ones -- also cited by Dan Sullivan of the Chartist when he put out a buy signal last month.
    "The A/D line is way above its January high. That's telling me the tide is coming in, and it's lifting a lot of boats," Acampora said.


    e finds the scope of the rally particularly noteworthy. Emerging markets are on fire -- China, Brazil, and India in particular, each up 60% or more from their lows, he said. Here in the U.S., the Standard & Poor's 600 small-cap index has shot up 49%, way outpacing the Dow.
    "This rally that started as an oversold rally has legs," he said. "It has leadership."
    He cited technology in particular as a potential leader of the next bull market. Meanwhile, Schaeffer, who is chairman and chief executive officer of Schaeffer's Investment Research, also recently spotted what may turn out to be a major buy signal for the market.
    Writing in the new Sentiment magazine and Option Advisor newsletter, Schaeffer discussed the significance of the 14-month relative strength index, which tracks the market's recent performance against its 14-month price history.
    The monthly RSI had hit an "off the charts" low reading of 18 in February, but as of the end of April closed above 30 -- the first time that's happened on a monthly basis since 1974. The average one-year return following such an event is 22.8%, as the table below (reprinted courtesy of Schaeffer's) shows.
    "It's an official buy signal," says Rocky White, quantitative analyst at Schaeffer's, who did the original research.
    But for how long?
    Need more evidence
    There, things start getting a little murky, and even confident technicians start clearing their throats. For Schaeffer, the Standard & Poor's 500 would have to hurdle its 160-month moving average of 1140 to definitively "switch off the bear sign." That's a long way from here.
    Even Acampora isn't ready to say we're in a new bull market yet. For complicated reasons I didn't totally understand, he said the market didn't give a clear-cut Dow Theory buy signal, which makes him think we're in "a secondary rally in a continuing bear market." He says we could see a nasty correction once the Dow approaches 10,000.
    "But these rallies can be spectacular," he reminds us.
    Indeed they can be, which is why he says aggressive investors with a three- to six-month time period should "get in the market now."
    For those of us who have stayed in the market and suffered, he advises: "Do nothing. I think you've passed the worst of this, for a while."
    That's good advice, unless you're way too exposed to equities and want to lighten up a bit on rallies. We may have hit rock bottom in the markets and the economy, but it's way too early to declare victory over the bear.