Ritholtz: Ten Bullish Charts, Signals and Indicators
Editor's note: This was originally published on RealMoney. It is being republished as a bonus for TheStreet.com readers.
This is an expanded version of a research commentary sent to institutional and managed asset clients of FusionIQ on Friday, Oct. 10 at 1:00 p.m.
For the past couple of years, I have been rather negative on the economy, on the housing market and on the stock market. Recall our "Cult of the Bear" article from January 2006 lead out the many potential dangers the economy was facing. With the Dow now under 8000 and the S&P below 850, it is time to put that perspective away, and begin to prepare for the eventual rebound.
A few caveats are in order before we begin. First, bottoms are a long process. Given the extent of the credit crisis, and the depth of the current recession, we are looking not for a "V" bottom, but for a gradual improvement in equities from the deeply oversold levels.Second, we believe in slowly deploying capital rather than trying to "guess" at a bottom. Third, we believe that patience is a virtue, and anyone making the purchase this day, week or month is doing so with a six- to 18-month window and not a tick bite to return. Regardless, we see many signs that suggest a reasonable upside move is an increasingly high probability. What brings us to this conclusion? It isn't the economy. And the credit situation is even worse than it was a week ago. Rather, with rampant fear and prices now off more than 40% from their year ago highs, we like the odds of a 15%-25% rally sometime in the immediate future.
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