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Are we there yet?

March 30, 2009 – 9:50 am

So is the bear market over? It is possible. We are having a healthy bounce and yes it could be sustainable. The news out of Washington is not nearly as bleak as it has been, but is it enough to turn the economy? The stock market for the moment thinks it might be. Monday’s very large rally was a continuation of the previous two weeks and Tuesday only gave back some of the rally, while the very volatile Wednesday was starting to show signs of an over reach to the up side. Thursday was up strongly and Friday so far is down. There will likely be a pull back and that pullback will be one to buy if we hold the recent lows. On a chart we see a ‘V’ bottom, just the opposite of what I expected a few weeks ago when I said in this Newsletter that of the two possibilities of bottoming, one being a ‘V’ the other a ‘U’, I expected a ‘U’. That is not happening. At the risk of being wrong again I do think we have put in the ultimate bottom and the possibility of a pullback is very high.

Meanwhile gather your list of stocks. That list should be full of companies with growth, cash and little or no debt; solid companies with great fundamentals. Stocks are still reasonably priced but next month starts the earnings season for the first quarter and the numbers are not going to be pretty. The question is has the market built those numbers into the expectations? No one of course has that answer.

This week we have seen some good news in housing, a restatement of how bad the fourth quarter was last year, being one of the worst in history, and possible good news in toxic debt removal from banks and recapitalization. All good things.

However, the market has historically embarrassed the most experts and pundits it can, so beware of the experts calling a bottom or an economic turn around. Of course your newsletter editor can be, has been, and will likely in the future be one of the embarrassed. I called for the ‘U’ bottom and got a ‘V’. When in the market be prepared to be wrong.

We have suggested you buy gently and gather your list of stocks. That appears to be good advice. Buy more aggressively on any pullback. If we did not hit the bottom a few weeks ago we are very close.

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