Please fasten your seatbelt
We have now proclaimed for the past 3 years that we are living through a secular bear market that will extend over this decade.
Nevertheless, many cyclical bull markets will surface during this period.
Before the end of March, the market is positioning itself for one important rally that we could appropriately qualify as violent. We generally give little importance to the level of indices because we concentrate our efforts identifying companies at a good price. Albeit, here is our two cents worth on the matter.
If history repeats itself, here are some preexisting conditions to an important rise of the markets:
- - Volatility levels are high indicating serious uncertainty.
- - Fear and pessimism are rampant (measured by the number of bears).
- - Short sellers are increasing in numbers.
- - For many individuals, indifference even replaced worry.
Again if history is to repeat, the market is heading for a significant rise starting in the coming weeks. From which level is the question! Unfortunately, as difficult as it was for us identifying from what level the Nasdaq would collapse, it is almost equally difficult for us to forecast that the rise will occur from the current level or a little lower. Nevertheless, as Confucius might say: greed has no limit but there is always a floor to fear.
But do not lose sight that the major problem of this decade (the individual and corporate debt levels) will eventually resurface to haunt indexes again.