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Bull Trap or restarting a Bull run?
Old 03-26-2020, 05:03 PM   #1
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Bull Trap or restarting a Bull run?

So what do you think. - 1) Bull Trap and we retest lows due to more unemployment, no economic growth, no end yet to covid-19 situation or 2) start of a Bull Run with a Fed tools (QE, buying equities) and Stimulus supported stock market ?
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Old 03-26-2020, 05:47 PM   #2
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Massive short covering and rotation! Six stocks carry 22% of the market weight of the S&P 500. So a rotation into the top 30 stocks can move the market. Yes the market is looking beyond the virus but, the damage has been done. No market drops in a straight line down without a counter-trend rally. Just like back in 2000, the market started to collapse followed by a rally then a major plunge later in the year. Bubbles eventually pop. The overall market dropped over 30%, but that drop was limited by the strongest stocks in the market. In reality some energy stocks are down over 98%, some banks dropped as much as 60% from their 52 week high and some retail stocks are down 90%. Many of those energy stocks and retail stocks are going to zero. Mall REITS like the so called blue chip Simon Property Group dropped from a high of $186 to a low of $43 and rebounded to $61. This is no doubt to the fact that they won't collect any rent for the next few months, but how many retailers will survive this. Macy's use to be a $80 dollar stock and now trades at $6 even after this bear market rally. Macy's bonds are still rated investment grade but trade like they are about to default. This is why you can't trust the rating agencies.
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Old 03-26-2020, 05:54 PM   #3
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Too many unknowns to make a guess. This market is unpredictable. I have never seen a bear market like this one. So I continue on with the investments that are comfortable for me going forward .
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Old 03-26-2020, 05:59 PM   #4
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I don't see any of this clearing up anytime soon. What that means for the market is anyone's guess. Remember it was rallying right into the pandemic, so that tells you something about how rational the market is.
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Old 03-26-2020, 06:12 PM   #5
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Bear trap, I think. People are impressed with the size of the bailout/stimulus but I think damage is wider and deeper than any rescue can be. I hope I'm wrong.
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Both!
Old 03-26-2020, 06:16 PM   #6
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Both!

It is both a new bull and we will retest.

Which is good, I need to keep nibbling on the lower prices.
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Old 03-26-2020, 06:40 PM   #7
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I vote for bear trap as well. I can't see this being a sustainable bull market with so many unknowns ahead of us...how long will the self quarantine actually last, what permanent damage to small businesses has occurred, when will production resume, and with which suppliers (Chinese ?), will consumer confidence return ?
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Old 03-26-2020, 06:52 PM   #8
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Bear trap, I think. People are impressed with the size of the bailout/stimulus but I think damage is wider and deeper than any rescue can be. I hope I'm wrong.
I generally agree.

The market is finally taking a breather, which is a good thing, because ultimately people have to get past sheer panic, and just get bummed out instead.

However, we're going to be getting a lot of bad news in the next few months, and when bear markets get this bad and there truly is economic damage, there is usually at least a retest.
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Old 03-26-2020, 06:56 PM   #9
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+ whatever on bear trap. I think it is way too early to assess the damage to the economy caused by this virus and how deep and long the recession will be and how consumer confidence will be shaken. My gut tells me this will get worse before it gets better and the rationale for the recent increase in stock prices is a mystery to me.
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Old 03-26-2020, 06:57 PM   #10
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Bear trap. My prediction: We aren't doing enough to stop the spread of the virus. It is going to be very, very, bad in some states. Florida is the next hot spot per the smart thermometer data and is home to many seniors, the most vulnerable group.
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Old 03-26-2020, 07:01 PM   #11
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My gut tells me this will get worse before it gets better and the rationale for the recent increase in stock prices is a mystery to me.
Some feelings of relief?

But I agree those are temporary. A recession and high unemployment is inevitable.

Because we couldn't track and those infected and trace their contacts early and quarantine them plus monitor via testing, everyone has to stay at home to avoid hospitals being overwhelmed.
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Old 03-26-2020, 07:07 PM   #12
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While I think the initial panic selling over the last month was overdone, I also think there is lots of pain to come. Global recession is coming, or more likely, already begun.

I'm sitting tight, not yet rebalancing into equities.
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Old 03-26-2020, 07:41 PM   #13
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I do not think this word means what you guys think it means (said in my best Spanish accent)

"A bear trap is a false technical indication of a reversal from a down- to an up-market that can lure unsuspecting investors."

https://www.investopedia.com/terms/b/beartrap.asp
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Old 03-26-2020, 08:12 PM   #14
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This article suggests that the run up may be driven by rebalancing in pension funds and balanced mutual funds. Also mentions short covering. It suggests this driver will continue over the next weeks and months. Hater warning - it is MarketWatch.

https://www.marketwatch.com/story/th...?mod=home-page

I guess they got ahead of me, I'm still dithering on a big rebalance back to my target AA, but I think it will be bumpy for a couple of months - at least through earnings report season which starts soon.
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Old 03-26-2020, 08:30 PM   #15
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Bear trap. I hope for another day or so of bouncing up, so I can sell some of my recent buys for a profit. But I expect to buy them back on the way back down. It's not fantasy football season, so I have to have some game to play.
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Old 03-26-2020, 08:45 PM   #16
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Short squeezes can lead to very strong up days.
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Old 03-27-2020, 03:05 AM   #17
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I also think it is a bear trap.
However there is an all out effort to try and restart parts of the economy for various reasons which include limiting any stock market losses.
If there isn't enough testing to show the true effects of the virus, perhaps certain states will restart their economies and thus perhaps spread out the downside effect.
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Old 03-27-2020, 03:16 AM   #18
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If you're trying to time it +/- 10% or so, its probably a bear trap. We're all suffering a lot bias emotions right now. Recency bias. Loss aversion. FOMO. All of this is in play in each of us at different times during something like this.

But who really knows.

I do think that in December I will be happy I bought at nearly any of the current up/down levels.

I'm 95% certain that in 2025 I will be very happy I did.
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Old 03-27-2020, 03:42 AM   #19
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As others have noted, a bull trap is when a market is going down, blips up, brings bulls in, then traps them and heads lower.
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Old 03-27-2020, 04:42 AM   #20
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There is know way to know except in the rear view mirror. It will depend on whether the news from here is better or worse than what is expected and priced in at this point.
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