It's Hard Out Here for a Bull

It's a tough and (recently) thankless job to champion the bullish cause in this market. Lows get blown out on a regular basis, indices get cut in half, and rallies stall after a few hours. Why would anyone want to continue to harp on about the vision of a pending bull market, or at the very least, a rally that lasts for more than a few days?

Seems like the odds favor the more bearish outcome: a continuation of the bear market, including, but not limited to, a return to the October 2002 lows. In the S&P, that's not such a big deal. But in the Dow, we'd be looking at a drop to the 7200 level. And the Nasdaq and Nasdaq 100 (NDX) are much, much worse, requiring a decline of another 22% to 1108 for the Comp and a decline of 28% from current levels to 795.25 for the NDX. Pretty tough to swallow.

Maybe because it's such a grim prospect, it's easier for me to focus on the positive, such as the next 1000- to 2000-point rally in the Dow. After all, these seem to come along every week to 10 days ... At least they have since the Oct. 10 lows.

Given that predisposition at current levels, I can again make a pretty good case for another rebound being just around the corner.

First, not only were last week's divergent new lows unconfirmed by just about every momentum indicator I am aware of, but there were divergences between the averages, as the Dow (and only the Dow) failed to confirm the new lows in just about everything else.

As you may know, I am not really a Dow guy. I think all the fuss about the Dow is actually kind of silly. But after all, "when in Rome," etc. etc.

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At the time of publication, Schiller was long Dow, S&P, NDX, Russell 2000 and financial services funds up to 55% invested levels, although holdings can change at any time.

Dr. Harry Schiller is a Registered Investment Advisor with the California Dept. of Corporations. He holds a Series 7 General Securities license as well as a Series 4 Options Principal license. He has been owner and editor of the Short Term Consensus Hotline since 1988. For more information, see www.harryschiller.com. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.