Beware the Rally
By John Del Vecchio and Brad Lamensdorf
The market is incredibly overbought.
However, recent action is indicative of a classic bear market rally.
If history is a guide from here, the rally will likely be short-lived.
The chart on the next page helps put bear market rallies in perspective. The DotCom bust let to a 78.40% loss.
However, there were eight bear market rallies during the bloodbath from 2000-2002.
Each one of those rallies was a sucker rally. The purpose of the rally was to pick your pocket as investors rushed in only to have the market turn against them.
In addition, many of the rallies were substantial.
For example, a 28.45% rally in four weeks!
43.74% gains in seven weeks!
51.32% gains in 16 weeks!
40.96% gains in eight weeks!
Those are big moves. Those moves have the effect of lulling investors into complacency.
Now is not the time to be complacent.
Now is the time to be extremely focused.
Now is the time to add to hedges.
As long as the liquidity situation remains unfavorable then any rally will be a head fake.
A classic bear market rally.
We saw one this summer.
We warned readers the entire time that the rally was a classic bear market rally. Then there was a smash followed by another rally.
Time for another smash…
To learn more about how these indicators can help manage risk in your portfolio, book a call with Brad. You may book a call here.
DISCLOSURE: LAMENSDORF MARKET TIMING REPORT
Lamensdorf Market Timing Report is a publication intended to give analytical research to the investment community. Lamensdorf Market Timing Report is not rendering investment advice based on investment portfolios and is not registered as an investment advisor in any jurisdiction. Information included in this report is derived from many sources believed to be reliable but no representation is made that it is accurate or complete, or that errors, if discovered, will be corrected. The authors of this report have not audited the financial statements of the companies discussed and do not represent that they are serving as independent public accountants with respect to them. They have not audited the statements and therefore do not express an opinion on them. The authors have also not conducted a thorough review of the financial statements as defined by standards established by the AICPA.
This report is not intended, and shall not constitute, and nothing herein should be construed as, an offer to sell or a solicitation of an offer to buy any securities referred to in this report, or a “buy” or “sell” recommendation. Rather, this research is intended to identify issues portfolio managers should be aware of for them to assess their own opinion of positive or negative potential. The LMTR newsletter is NOT affiliated with any ETF’s. Active Alts is affiliated with Lamensdorf Market Timing Report. While LMTR uses charts from SentimenTrader, they do not have a financial arrangement with SentimenTrader Past performance is not indicative of future results.