Friday, December 26, 2008

3 part rally

A great many investors, myself included, have been expecting a powerful rally to correct the Oct. Nov. crash. I'm wondering if we didn't already get it. Instead of one big rally we've had three smaller rallies all of them at least 20%.

Normally a bear market rally will last 1 to 3 months and gain anywhere from 5-20%. As you can see all three rallies have been short in duration but they have all been in the very top range of the normal percentage we would expect to see from a counter trend rally.

We're starting to see quite a few sentiment indicators pushing back into extreme levels that have signalled the end to the other counter trend rallies this year.

The only thing that suggests that we should still have further to rally is the fact that the market is still very stretched below the 200 DMA. The fact that the market hasn't been able to rally prior to Christmas, one of the most consistently positive times of the year, makes me wonder if even 27% below the 200 DMA is going to be enough to get this market moving higher.