Tough times for bears

By: ispeculatornew
Date posted: 04.10.2009 (6:54 am) | Write a Comment  (1 Comment)

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bearFor the past 3 weeks, I’ve been speaking with several players in the market who have been short the market, especially when the S&P500 was approaching the 800 level. They were convinced that this is a bear market rally and that the market will be back on its bottom soon. Of course, since then, the opposite has happened with the market going in a pretty steady upward direction. Such markets always create interesting dilemmas. The question being of course, how far are you willing to go before you admit you are wrong?

And no, I’m not saying these bears are wrong, simply that when entering such positions, I believe it is essential to be able to sustain a maximum loss but also have an exit point. Because if you don’t, such a trade can become an investor’s downfall by itself.

A few of these friends have finally capitulated this week closing out their position. The more difficult part is that a lot of data has been improving in the economy, perhaps not being considered good numbers or even a rebound, but probably helping most economists to start to envision a rebound of the economy at the start of 2010. But if the typical market in a recession rallies 6 months before the economy, you would think that the market still has some suffering to do. There of course several ways to deal with this and personally I use exit points. When I enter a trade (apart from long term trades in a retirement fund), I generally have 2 exit points that are pre-determined, one that would close out profits and one stop loss.

What are your thoughts on this? Is this a bear market rally and how long would you stay in such a trade??

sp500

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1 Comment

  1. […] is a though times for those who think that the bear market is still alive by Intelligent Speculator… I’m under the feeling that the bear got a shot pretty much in the […]

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