Weekend Thoughts

Have I lost my mind? Am I way too overboard with that bullish rant I made? Maybe I am....maybe I'm not. Here's the deal....I strongly suspect that the low we saw in March is NOT the once in a generation low that pundit Doug Kass called. One day...and I don't know when, it could be months or years, I believe that low is going to get violated.

I just read an article from a Canadian financial writer Gordon Pape who believes we are in a bull market but that we will see a 10-15% correction followed by 1-2 month sideways action. This seems to be the consensus from the bulls as I heard another bullish pundit say the same thing on BNN today (the Canadian equivalent to CNBC). Don't get me wrong.... I don't think the majority are bullish.... but there's definitely a lot more bulls on TV compared to 2 months ago, mind you there's just as many if not more skeptics. The bulls are cautious here for the ST but that's not necessarily a bullish contrarian indicator because expecting a ST pullback to buy on the dip is often what you see at major turning points. That dip ends up being the first move of a bear market. Remember when oil went to $140? Bulls were saying it's overheated but a dip back to $100 would be a great buy...Abbey J. Cohen said to take profits in tech stocks in March 2000. Good call, but she was calling for a correction only.


Therefore, like I said before, if we get a 10% correction then I think the rally is done. A bull market in its early stages doesn't give you such convenient entry points. I've said this before.....always be aware of when the market appears to hand you a gift for that gift is usually a guillotine in disguise destined to chop off your head. The best trades are usually the toughest to make and if you feel quite comfortable after a trade chances are it's the wrong trade or you are early.

A 10% correction would be far too easy to buy. If this is a true bull run any correction and consolidation should not result in more than a 5-6% drop from the highest point.... I’ll even stretch it to 7% max. Anything more and I would be very suspicious about this bull.

Therefore, I believe that if this is a bull run we should see a rally attempt be made starting next week sometime. It's possible 875 will be retested or even slightly breached first. If next week is another 5% down week then I believe the bear has returned even if the week after is positive.