In This Rally We Trust

The recent market rebound has shown a lot of legs ever since the S&P; 500 made a 12-year low on March 9th. This prompted many readers to ask whether this is still a bear market bounce or possibly the beginning of a new bull market.

Reader Mel had this comment:

As I’ve said before, I appreciate very much your sharing your opinions, including your passing on of the writings and videos of others. But for those of us who have been following your advice to stay on the sidelines (with the exception of the new hedge strategy) during the past few weeks, it would be very helpful if you could include a few lines in your daily blog just stating that you don’t trust this rally, even as the market continues to move higher 🙂

Thank you again for sharing your knowledge and opinions.

I pointed out in Bear Market Rallies that rebounds off new lows can be fierce and lengthy in duration. Of course, a subsequent correction can be just as violent as we’ve seen during the first couple of months of 2009.

To me, this is not a matter of trusting this rally. While I believe that this bear market is far from being over, it does not mean that we won’t get a prolonged period of rising prices even to a point where our domestic TTI signals an outright buy. If that happens, I will follow the trend; however, my hands will be placed firmly around the trigger for our exit points.

The line between bullish and bearish territory is clearly drawn in the sand, so there is never any question as to where long-term market direction is at. I’ve seen many newsletter writers being labeled over years to be either perennial bulls or bears.

I am neither.

If the market crosses the major trend line into bullish territory, I am bullish. If it heads south and crosses below the line, I am bearish. It’s as simple as that. I have no bias either way and let the market tell me what position to take.

Sometimes, when a period, such as this bear market, goes on for some time, a few readers have commented that I am too negative. That is incorrect; I simply go with the trend and my views at the time support the current reality and not some wishful thinking.

This allows me to treat events in the market place without too much emotion and simply focus on what’s most important, which is to be onboard when a major trend develops.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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