bear market rally

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    By Colin Twiggs
    September 20, 4:30 a.m. ET (6:30 p.m. AET)

    These extracts from my trading diary are for educational purposes and should not be interpreted as investment or trading advice. Full terms and conditions can be found at Terms of Use.



    The press is full of headlines about stocks soaring and massive rallies. I cannot imagine too many fund managers rushing out to buy stocks in the middle of a market cave-in. That is how you lose your job. The current rally is not driven by new investors rushing in to snap up bargains. The SEC and UK financial regulators have both banned short selling of financial shares, forcing shorts to cover their open positions — causing a huge upward spike in financial stocks like Morgan Stanley [MS] and Goldman Sachs [GS].

    We are undergoing another bear market rally. I often equate these to a drowning man's relief at finding a life-raft — before the realization dawns on him that he is still lost in the middle of the Pacific ocean without food or water.

 
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