Unpredictable Stock Market Creates Bear Market Buzz

Posted on July 21, 2010
Filed Under Investments | Leave a Comment

For most of 2010, talks of a bear market (depressed stock market) has been circulating. However, considering the intense instability in the stock market throughout the month of May, analysts have yet to make that conclusion. Some say the bear market signals aren’t a coming stock market crash, but merely stock market correction 2010. Others say the market has already turned inside out and can’t get any worse. One thing everyone seems to agree on is that no one really knows whether the bull market that began in March 2009 is about to end.

Article Source: Bear market buzz builds as stock market grows more unpredictable

Is a new bear market approaching?

The bear market buzz began as early as January this year when marketwatch.com reported on the Elliott Wave Financial Forecast. Successfully calling the 2008 stock market crash and the 2009 stock market rebound, the Elliot Wave said a bear market would retune in full force in 2010. It compared the situation to a brief stock market bounce after the initial stock market crash in 1929 and predicted a similar collapse. Author of the Dow Theory Letter Richard Russell and other investment gurus like him have also predicted a stock market crash and advised clients to get liquid for quick cash. The market tanks and rebounds depending on the news of the hour, and that has not appear to be a consistently profitable position.

Stock market correction 2010

Considering the confluence of recent events such as the Flash Crash, European debt crisis, the financial reform bill and the oil spill in the Gulf of Mexico, the bear market buzz is easy to understand. Many investors are now lacking confidence. Anthony Mirhaydari, however, stated on MSN that a new bear market isn’t just around the corner. Long-term breadth, global economic growth, earnings and interest rates all suggest that higher highs are ahead for stocks, according to Mirhydari. In addition, as part of a long-term bull market, there is historical pattern for a correction of the magnitude that took place in May.

Is the stock market instability an overreaction?

Recent events like the May 6 Flash Crash have stoked a high fear index in the stock market. And serving as a wakeup call for many investors is the European debt crisis. In an interview with CNNMoney.com, however, Phil Dow, director of equity strategy RBC Capital Markets in Minneapolis, said the new bear market buzz is overblown. As fear in investing increases, some hard hit stocks have been oversold. A clear sign that investors overreacted to the European debt crisis was May’s stampede into the U.S. Treasuries. In his interview with CNNMoney.com, Dow said that tech, energy and health care stock will most likely be due for a comeback once investors realize that new bear market fears may just be stock market correction 2010.

Nimble traders thrive on volatility

According to tradingmarkets.com, it is normal to expect some sort of a bear market given the duration of the present bull market. Helping restore the market back to health is the 5 percent to 10 percent correction in the S and P 500, and not only is that a good thing, it’s perfectly normal. Furthermore, both long and short, the best trading opportunities often arise during market corrections. And nimble investors could make money through many opportunities as volatility is expected to rise up further before is subsides.

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