Kass: Exquisite Moment

This column by Doug Kass was originally published on March 22 at 8:37 a.m. EST on Street Insight. It's being republished as a bonus for TheStreet.com and RealMoney.com readers. For more information about subscribing to Street Insight, please click here.

I believe we are entering an exquisite shorting opportunity, and that is precisely how I am gaming the market now. I recently made the observation that after the past market decline had concluded -- with a possible 5% to 10% drop -- equities could rally back to close to the old highs with meaningful breadth and volume divergences. After that, a more sustained bear market would commence.

The 45-point S&P advance over the last three days suggests that the blueprint of 1937 might very well hold in 2007.

In looking at the last century's four-consecutive-year rallies (out of oversold conditions -- 1932-36, 1957-61, 1982-86 and (possibly) 2002-06 -- the fifth year is almost always problematic, as witnessed by the crashes that occurred in 1937, 1962 and 1987. ...