The bear market rally is about to end, according to Michael Lombardi. Although I have no idea who he is, I am intrigued by what he said. According to him, phase one of a bear market is defined as the period from October 2007 to March 2009 (a period of 18 months), when the stock market fell 55%.
Phase two of a bear market, which is now, works to bring investors back into stocks. It is his opinion that we are presently in the "late stages of phase two" of the bear market. Phase two of a bear market can last twice as long as phase one, as it takes that long to convince investors they should get back into stocks.
Phase three, the final phase of the bear market, brings stocks back to or below the level phase one of the bear market took them down to. In this case, 6,440 for the Dow Jones Industrials. Phase three of the bear market is quick in nature. Stock prices fall rapidly. And, once they reach their low, they tend to trade in that range for months, if not years.
Should I believe this? First, I don't think this is a bear market rally. I believe we are in a bull run, although I believe the time for the bear to arrive is getting nearer, but not yet. I believe the STI would have to take out its old highs (3800)before succumbing to the bear market. As such, I will be using the coming market lull to buy. According to OCBC, stocks I should look at include CDL, China Animal, Ezion, Lian Beng, Oil and gas (SembMar and KepCorp), telecoms and Hyflux. Personally, I will look at SembMar, Zhaojin, Noble and probably Sands China.
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