The following was taken from The Dow Theory by Robert Rhea:
Bear markets seem to be divided into three phases: the first being the abandonment of hopes upon which the final uprush of the preceding bull market was predicted; the second, the reflection of decreased earning power and reduction of dividends, and the third representing distress liquidation of securities which must be sold to meet living expenses.
Based on what is going on in our financial market, we are at the end of the second phase or the beginning of the third phase. Recently, the earning and dividends have been reduced tremendously while the market rallied (reaction to the action). My assessment is that as layoff continued to dominate the headline, the liquidation of assets must be met soon to finish up this bear market.
Art
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I think you're right about where we are. Unfortunately, we didn't get the rally that is customary as part of the transition from one phase to the next. Must mean that it's gonna get pretty ugly.
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