Free Republic

Let's call this what it is: A new bull market in stocks has emerged from the ashes of the financial meltdown and the deep recession that followed. And it's signaling the onset of economic recovery. Free-market capitalism is more durable, resilient and self-correcting than its detractors would have us believe. This is not just a summer rally — although a 12% market rise since July 10 is absolutely splendid. There's a lot more going on here. Over the last five months, since March 9, the broad-based S&P 500 is up 46%. If I'm not mistaken, a 20% rally that is...

[T]here were six major false bottoms after 1929 in the DJIA each followed by an average bear market rally of 29.3%. Investors who “bought for the long haul” in any one of these six great rallies were mercilessly slaughtered and did not make their capital back for many years into the future. Indiscriminately buying into the top half of a bear market rally is a surefire way to quickly and efficiently destroy your capital!

Bottom in? Maybe. Maybe not. In the January 19, 2009 investment letter I wrote: “Sometime in the first half of 2009, the S&P will challenge and likely break below the November low at 740. I don’t know if this decline will end at 739 or 699, and the DJIA will ideally fall below the 2002 low of 7197. That’s the bad news. The good news is that once that decline is over, the market will enjoy the largest rally since the bear market began in October 2007. It will be ignited by economic statistics showing the rate of decline in...