The Bulls Are Wrong. So Are the Bears…

Last Tuesday through Thursday, the markets were on a tear. Action was being taken against the coronavirus pandemic, the President was signing the stimulus bill that Congress had bickered over, and Boeing Co. (BA) jumped 70.5%.

For the Dow and S&P 500, it was the first three-day win streak in months.

Then come Friday, markets tumbled. Still, the Dow was up 12.8% for the week, the best weekly result since 1938.

The big question for April and beyond is whether the winning streak of the middle of last week will carry on, or whether Friday’s tumble is a sign of things to come.

Both narratives have their backers. You have the ultra-bulls on TV, in newspapers, and online saying that the worst is over, the virus isn’t all that bad anyway, and so much liquidity and stimulus has been pumped into the system that will find its way to the stock market that stocks simply have to go up…

And you have the ultra-bears who say the impact of the pandemic is worse than we thought, and could get catastrophic. In their view, this isn’t going away any time soon.

On each side, the believers fully expect not only to be right – but also that the market will act accordingly any day now. For the bulls, everything is OK and getting better, so markets will spike upwards any day now.

For the bears, we’re on the express elevator to an 80% drop, no question about it.

But the Reality Gap here is that, while the bullish believers are convinced they have it right, so do the bearish ones.

And while those two forces battle it out, we’re not going to get either of their outcomes.


Here’s why


What History Can Teach Us About Finding Market Bottoms

“Hope springs eternal” – first coined in 1733 by Alexander Pope in his poem, An Essay on Man – has become a common phrase to describe one of man’s best characteristics…

Even in the bleakest of situations, humankind has always displayed incredible determination and a belief that better days are ahead.

Through war, famine, plagues, and more, tough times strengthen our resolve that things will eventually start looking up.

And right now, the COVID-19 outbreak is testing our hope.

Traders and investors are no exception. After more than a decade of good times during an historic bull run, the crash caused by the coronavirus outbreak feels like a huge gut-punch. The market’s original record-breaking nosedive had everyone from giant institutions to those with the smallest of portfolios searching for a bottom. How fast was that drop? 22 days. Here’s how that compares to the fastest drops of all-time:

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And now the biggest three-day gain in the Dow since 1933 has given a glimmer of hope and an endless debate about if THE bottom is in.

Whether you think Monday’s bottom is the bottom or not, the news on the coronavirus front is still daunting.


And history is not on the side of the bulls