Get Ready for a Powerful Countertrend Rally in US Stocks
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Eric Roseman says “a vicious, countertrend rally” in US stocks is a distinct possibility following the markets’ thumping in June. But don’t break out the champagne yet. Eric says 2008 is the worst year for stocks since 1998 and that there’s more pain to come…
After a punishing decline in June, U.S. and international stocks are due for a serious bear market rally.
The number of traders betting against further declines, known as the level of short interest, now sits at a record 3.6% of listed equities in the United States. That means a vicious, powerful counter-trend rally is highly possible in July or August.
The 55% jump in short interest since October exceeds all other gains since 2000, according to Bloomberg. The six previous increases averaged 28% and lasted 11 months. During those periods, the S&P 500 declined an average of 6%.
But before breaking out the champagne to celebrate the end of this bear market, remember that we’re still a long way from the finish line as it pertains to housing and credit. Also, the Fed has lost control of inflation. Many foreign central banks in Asia are way behind the inflation curve and other emerging markets will follow amid skyrocketing food and energy prices.
Personally, this is the worst year I’ve seen since 1998. And I’ll be candid like always.
Most of my recommendations have pulled lower over the last 12 months — including my contrarian value investing strategies. Only gold stocks are working for me along with positions in agriculture, the yen, and reverse-index funds.
The final stage of bear market capitulation has not happened yet. The pain will truly end when everyone is dumping stocks en masse and more losses are inflicted. Use any intermittent bear market rally this summer to sell stocks. The worst is not behind us.
Source: Be Ready to Sell as Soon as Stocks Rally!
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Tags: bear market, credit crisis, Downturn Strategy, Eric Roseman, US housing crisis, US stocksAbout the Author
Eric serves as an editor and Investment Director for The Sovereign Society's Commodity Trend Alert. Eric's talents include blending a dozen or more alternative investment funds to produce consistent returns to traditional asset classes and making commodity based recommendations with huge upside and limited downside.
The Offshore A-Letter specializes is an elite global investment opportunities, asset protection strategies, tax management solutions, second citizenship and residency programs and offshore structures.