Will This Finally Be a Decent Bear Market Rally?

Stocks exploded up - finally. That's what's "supposed" to happen during Bear Markets. If this carries forward, it could even be a classic "Rip Your Face Off" rally. Temptation to jump back in to the market will abound. Those who hedged or trimmed - or perhaps even sold out altogether with the objective of having cash when the time is ripe to pick up bargains - will feel the itch to buy. Either that or they'll regret they ever hedged or trimmed or sold, but will control their emotions and stick to their guns.

At this point, I think the itch will need a real RYFO rally before the scratching begins.

For those of us who sit in the Bear Market Camp, the rally may present a different opportunity - perhaps adding some Inverse ETFs to either hedge our remaining stock positions, or even to generate a couple of shekels of profit - a rare opportunity in a Bear Market.

Or, perhaps, late comers to the Bear Market party may find a RYFO rally a good opportunity to do the hedging, trimming, or selling they wished they'd done earlier.

All of that's percolating out there in Investment Land - I think.

Meanwhile, rather than get too caught up in emotions of one or the other sort, here are some notes from two of our Brain Trust that were published before the rally, and so not swayed by it (not that I think they ever would be).

Source #1:

-   A historical time – in uncharted waters – have to be prepared for anything

-   Ref Fed Balance Sheet: Fed is not tightening – money is still easy

-   Higher prices will create less demand, less consumer spending – leads to recession – Stagflation

-   RR’s “Inflate or Die – Fed must keep inflating – If they raise rates too much, leads to bad downturn

-   Keep PMs as well as Bonds and Cash – Avoid Stock Market

-   Stocks clearly bearish; breaking records going back to 1920s – following previous patterns – set to fall much farther

-   Dow Theory confirmed Bear Market

-   PTI: Bearish/Neutral – Firmly Bearish if breaks below 2022 lows

-   AD Line clearly bearish – underlying weakness in overall market

-   NASDAQ will go down to 10,000 level – Down 32%, could go down 75%

-   Global stock markets reinforce this

-   Interest Rates: Indicators way overbought

-   Bonds: Indicators way oversold

-   Rise in 30-year yield will prove temporary, based on indicators which have been accurate for years

-   USD remains bullish – higher interest rates reinforce this – This is basically deflationsary

-   Many signs pointing to major bull market in Commodities

-   Analysis of Gold, Treasuries, 10-year yield

-   Gold and Bonds have role in inflation/recession

-   Gold looks like forming a base like 2020 when it broke out to new highs – Once it hits new highs, will signal resumption of bull market – likely will happen later in year after A Rise/B Decline

-   Next A Rise confirmed when price stays above 1880

-   Gold Shares forming bottom relative to Gold – Once breaks out, will go higher than Gold for years

-   Downdraft in Commodities could last longer.

Source #2:

-   Bear Market rally was anemic, especially compared to past drops, e.g., 1929, 1973 (ref: previous rally)

-   Exiting a long period where assets only went up – Now entering opposite long-term trend

-   A Recession – or worse – coming: Can’t lose trillions without a severe impact

-   Economic environment has changed from positive (for most people) to negative faster than since 1929

-   Get out of debt as soon as you can, if exposed to rising rates – Build Cash

-   Look at Inverse ETFs

-   Commodities: If they continue up, will be global pain the likes of which we haven’t seen in the modern world. – Will Sell ½ DBC in face of Commodity correction.

-   PMs “worries me” – should be rising in response to inflation, as has been the case in the past – But at some point Gold and Silver will break out into new up legs

-   Still enormous bullishness, especially among young/inexperienced investors

-   US Index up 9.91% in 2022 – very rare to rise so quickly

-   Looking to get back into PSQ and TBF: will advise

-   Cryptos: Thins many people will be ruined

-   Bonds: Bad as US Treasuries have been, other country bonds have fared worse

-   EURO has fallen 20% this year

Maybe you'll a nugget or two helpful to your situation.

With that, it's humid and going to heat up in our neck of the woods.