Monday, May 11, 2009

Pundit Love

I admit, I've hated this historic rebound in the stock market. Historical events are never exactly predictable and they have a siren's call to join in at just about the wrong time. For better or worse Stonehouse portfolio discipline makes emotion driven action more difficult. A remarkable similarity is found in the in commentary in 2001 by that successful self promoter and motor mouth Jim Cramer and some of the statements of the past week.

A Bull Is Born

By James J. Cramer
Published Nov 19, 2001

Professionals hate this stock market. They think it's overvalued on earnings and going up solely because of the lack of other alternatives. They think it's a roller coaster poised atop a downhill drop, an accident waiting to happen. And they hate that there are no alternatives: Cash brings you next to no return and bonds seem downright dangerous given their skimpy return and monster run.

Individuals hate this stock market, too. They've had it with losses, they're fed up with bad advice from crummy mutual-fund managers, and they're tired of the blue-chip tech stocks they paid hundreds of dollars for that are now worth a fraction of that. Either they've sold everything and turned their back on the market or just decided it isn't worth throwing in good money after bad and started hoping to one day get back within a few dollars of where they got in.

Which is precisely why I think the market is poised to go higher -- perhaps dramatically so. Look how easily it's shrugging off bad news. Last week, after an American Airlines flight crashed in Queens, it barely blinked; traders paused to sell off the usual suspects -- travel and leisure -- and then kept buying. This market might well be a baby bull, conceived in the despair of September 11 and born on September 21, 2001, after the worst sell-off since the Great Depression.

The main reason is simple: Interest rates are lower than they've been in 40 years. And those lower interest rates that allow buyers to finance new cars for nothing,

But for the date, it would not be out of place in today's punditocracy.

May 11, 2009
Published in

Gray Emerson Cardiff of Sound Advice has been mulling a major market move for some time. He wrote in his most recent issue, published in April: "As noted in the March issue, we are approaching the cusp of a new SuperCycle,

So what happened to Mr. Cramer's bull? It flirted with the forty week moving average then expired, sending the S&P to a new low, 30% lower, a year later which eventually was tested and retested before proving to be the base from which a bull market could begin. (click on image to enlarge)

Plan your trade, and trade your plan.

John Barnyak