Some analysts have begun pointing to the bear market rallies
during the Great Depression and the Lost Decade in Japan during the 1990s.
Until we see it break through that level I think the risk is any rallies are just bear market rallies
, impressive as they've been, such as the one we're in at the moment.
Bear market rallies
, when the stock market appears to be recovering from a negative trend, are the result of a change in investors' sentiment rather than an indication that matters are improving.
But, in the last two years, the stock market has predicted six out of the last zero economic recoveries --Aathat is, six bear market rallies
that eventually fizzled and led to new lows.
As witnessed in the past: bear market rallies
can be sharp which can surprise most of the investors on the upside and we expect the same to happen if the Nifty (the National Stock Exchange Index) crosses [the] 3,150-3,200 levels, says Rohit Chothani, director at Padmakshi Financial Services, Mumbai.
That said, significant bear market rallies
are likely and should be possible to benefit from them, as happened last week, with some returns over the shorter term.
This bottom will not solidify before August and I will not be surprised to see at least two spectacular so-called Bear Market Rallies
between now and August where the speculators will be feasting.
At best, we have seen bear market rallies
that were soon overwhelmed by the reality of worsening economic conditions.
This helps them avoid losing money when bear market rallies
end and maximize their gains in the early days of an emerging bull market.
This is a particularly difficult time to read in investment terms-bear markets tend to throw out violent bear market rallies
, only to retrench shortly afterwards (as we are seeing regularly).
Before everyone starts kissing each other, it would do investors well to remember that the NASDAQ has accomplished two 40% bear market rallies
since its March 2000 high.
But you can have significant bear market rallies
within that time frame.