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THE LOW “QUALITY RALLY” AND STAGES OF A BEAR MARKET

Some good thoughts here from David Rosenberg:

LOW QUALITY RALLY


Reuters did some nifty work and showed that in this last leg of the rally, which started on July 10th, CCC-rated stocks have surged 26.4%, BB-rated stocks are up 19.3%, while AAA-rated stocks have risen 9.5%. Look — when China is up 80% year-to-date, India 60%, and both the Kospi and Hang Seng up 40% — and dare we say, the SOX index up 60% in less than six months — it’s probably safe to assume that we have a huge speculative junky market on our hands. And, we know from the 2000-2001 and 2007-2008 experiences, they don’t tend to end well.

BOB FARRELL’S RULE #8 IN PICTURES

“Bear markets have three stages – (i) sharp down, ii) reflexive rebound, and iii) a drawn-out fundamental downtrend”.
We have little doubt as to which stage we are in today.

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Source: Gluskin Sheff

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