Bull versus Bear
I think something like this:
What I’ve scribbled out above is an S&P which free-falls again to March’s lows (plus or minus a little bit). How would the different camps react to this?
- The bears would, of course, be delighted at first, but here’s the clincher – - I think the bears have been so battered for the past 7 weeks, that the moment the S&P gets anywhere close to the 780-800 range, they’re going to close out everything and engage in a big group hug. 780 is the number everyone is talking about. If the market simply keeps falling, the bears are going to be furious (and feel mighty cheated), since the easy and obvious take-profits point didn’t matter much. My point is that the bears will leave almost all the potential profits on the table.
- The bulls would be equally furious, too, because all their easy profits from the past 7 weeks – - - especially from the high-flying momentum stocks - – would go up in smoke. Their relief would come with a double-bottom, but frankly I think newer bulls would feel so betrayed by the market (again) that they would not be as enthusiastic to re-enter.
[by Tim Knight]
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