Tuesday, April 29, 2003

Strong Market Rally 04/28 (Comstock commentary M-W-F)

The stock market had a pretty good rally today with the Dow up 165 to 8472, the S&P up 16 to 915, and NASDAQ up 28 to 1462. The reasons given by the media for the rally ran from a short squeeze, crude oil declining, not many earnings disasters, to better news on the SARS virus. The SARS virus has been something we have been very concerned about since a very sharp viewer we communicate with from Singapore has been keeping us in touch with the problem in Southeast Asia. Things weren’t looking so good for a while, but the statistics did show pretty good relief over the weekend.

The rally could have been SARS related or any of the other above reasons, but the main point we would like to make is that rallies like these are normal in a bear market. We expect them, and usually act to benefit from them. However, with that said, we also make sure that we cover short positions that are breaking out and futures positions that are breaking out. We can’t take a chance, that a short position may wind up being the target of a major short squeeze, will affect our funds too detrimentally. We advise our viewers to also protect themselves with stop orders for any stock breaking out with good volume irrespective of the fundamentals. We now have the flexibility to replace shorts that are breaking out with other shorts that continue to show a deteriorating pattern.

The rally that is taking place is not to be confused with a new bull market. The chances of a new bull market starting from here are very remote. The valuation levels are much too high, the sentiment figures much too bullish, and the public participation still much too high, for this to be the beginning of a new bull market. Please keep in mind that the 1929-1932 bear market was punctuated by six big rallies with respective jumps of 48%, 16%, 23%, 29%, 35%, and 25%. Each one of these rallies should have been sold or sold short in order to achieve the maximum returns in that significant bear market. >>Full story ...

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