What do you think could be the news that has the potential to spark a 20-30% rally in this market? I think (though I may be wrong), that the market cannot turn without a catalyst. Remember the reaction after the first 700bn bailout plan was rumored back in September? What if they finally announce a detailed plan for nationalization and reorganization of all banks? This should theoretically be the bottom, because all equity holders and most bond holders of banks will be wiped out, and there will be no more losses to recognize at that point. This may or may not be the long term solution we need to get out of a recession, but could very well be the end of the bank and liquidity crisis? And this is an interesting observation - prices may not be too far from their top, so we didn't lose that much in terms of price, but in terms of duration and time, we are in a bear market for nine years already.
I don't know the exact answer. But, I recall during the 03 bottom, what started the market roaring was a series of earnings reports that were considered better than expected; starting with yahoo. I know I was rudely awakened on a few shorts, waiting for capitulation as all the (clueless) pundits made sure to advise. Shorts were roasted on the blast-off. One could argue that the setting was in place with the massive lowering of interest rates and the steeply + sloped yield curve (as it is today), but those are the specific events that really ignited the rally as I recall. There was an objective study done with regards to fractals (similar to elliot, but on more scientific grounds) about late 06-mid 07 or so. I didn't believe the author when he said to expect a 30% retrace in markets, since they were doing so well. Oddly enough, he was spot on, except for the fact that the retrace has been worse than 30%. That being said, his analysis was that a monstrous rally was in the works after that retrace. I'm still watching. And his work is about the only 'objective' study of fractals related to elliot that I've personally seen. There was a layman's book I found pretty fascinating, titled, 'the singularity is near.' to make a long story short; growth in every type of system is growing exponentially fast (concluding that machines and human knowledge are on a path to merge, but I digress). The exponential growth curve is still alive on every major index (including inflation), implying to me that this is only a setback (albeit a major one) that will look like a blip on that exponential curve in hindsight.
Thanks for the input. I think the catalyst for the 2003 bull market was the US invasion in Iraq on March 20, 2003. I remember the mood was very negative back then, and everyone was talking the dollar and the war... As soon as the war began, the market rallied.
So the cylons are near...great... Just kidding. Very interesting post and there are some amazing things happening. I read this yesterday and it blew my mind. Amidst all the turmoil we are advancing faster and faster. http://www.bloomberg.com/apps/news?pid=20601124&sid=ac9.rZCRCs8Y&refer=science As a new trader, I have no idea what the bottom would look like, but we need clarity and inflation I would assume. And from there our rapid advances in technology can carry a new bull higher than we have been.
when ppl stop selling perhaps? this selloff is due to a lack of confidenece; not bad fundamentals. The economy is expected to shrink a whole 1.5% in 2009. Chump change.
Catalyst number 1: A decline of 30%, which would take the S&P 500 to about 560, from where it could easily rally 30%. Catalyst number 2: More monetisation of debt by governments. For example, US govt deciding to pay the outstanding balance on all home loans.