equities remain under pressure with the major indices 2.4-3.0% lower, paced by the NASDAQ amid low volume rout following yesterday's violent
bear market rally. Debate continues whether this is a true measure of sentiment between the holidays or a buying opportunity into the correction; that won't be known until volumes pick back up early next year and any clarity emerges on the government shutdown and U.S.-Sino trade negotiations in January.
During the webcast, he also remarked that he views the current rebound as a "
bear market rally."
This could actually lead to a
bear market rally in MSCI China, whose valuation has been derated to seven times forward earnings.
The
bear market rally in crude oil/metals has led to capital flows to bombed out Toronto/Vancouver equities.
If prices are dropping, the run would be referred to as a
bear market rally."
And Profit Confidential turned bullish on stocks in March of 2009 and rode the
bear market rally from a Dow Jones Industrial Average of 6,440 on March 9, 2009, to 12,876 on May 2, 2011, a gain of 99%.
These signals are based on the intrinsic behaviour characteristics of equity markets: upward trends are usually accompanied by lower volatility (except in
bear market rally situations) while bear markets experience higher volatility.
Moreover, Lydon suggests that since most advisors do not believe we are in a recovery, and that the market's performance since March is merely a "
bear market rally," any moving of clients' money away from cash and fixed income into the equities market would likely be into a "more defensive posture," and that the Schwab ETFs would be considered by most advisors to be low-cost, conservative core holdings.
Rosenberg said he sees "a
bear market rally as opposed to the onset of a new secular bull market" and urges investors to stay cautious.
"There is a risk that this is a
bear market rally and the situation could reverse when such liquidity leave the cities or country, or there is new shock to the economies," explained LaSalle Investment Management's Asia-Pacific head of research and strategy Kenneth Tsang..
Polled following Bolton's comments, three-quarters (75%) put the surge in equities down to a
bear market rally.
