Talk of a bear market (depressed stock market) has been circulating for most of 2010. 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 signals do not represent a stock market crash, but simply stock market correction 2010. Others say the market has already bottomed out and unable of getting any worse. No one really knows whether the bull market that began in March 2009 is about to end, and that’s something everyone seems to agree on.
Source of Article: 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 brought to comparison the situation and a brief stock market bounce after the first stock market crash in 1929 and forecasted a similar collapse. Other investment gurus, like Richard Russell, author of the Dow Theory Letter, have also predicted a stock market crash and urge clients to get liquid for quick cash. That hasn’t been a consistently profitable position, as the market tanks and rebounds depending on the news of the hour.
A look at the 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. But Anthony Mirhaydari, reporting on MSN, said a new bear market isn’t just around the corner. Mirhydari said long-term breadth, earnings, global economic growth and interest rates all suggest that higher highs are ahead for stocks. 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.
Stock market volatility an overreaction?
Stoking high fear index in the stock market were recent events like the May 6 Flash Crash. 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. Some hard hit stocks have been oversold as investors turned chicken. 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 are blooming on volatility
It’s normal to expect some sort of a bear market given the duration of the present bull market, according to tradingmarkets.com. A correction in the S and P 500, from 5 percent to 10 percent, is normal, and it’s a good thing when it happens because it helps restore the market back to health. Also, the best trading opportunities, both long and short, often arise during market corrections. And as volatility is expected to increase further before it subsides, nimble investors could find many opportunities to make money.
