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Even Bulls Should Rest


The stock market has been very bullish since Christmas.  Maybe, it is too bullish and needs to “bump along” for awhile before resuming its climb?

It has behaved relatively normal since its March, 2009 low.  Compare it with some other market rallies:

Chart of the Day
You’ll notice the current rally most closely tracks the rally following Nasdaq’s crash in 2000.  It is nowhere near as robust as the 1932 rally, which promptly crashed again (not shown above).

But, the market is now 9% above its 200-day moving average.  That is clearly not sustainable.  Former Fed Chairman Alan Greenspan said he doesn’t see any “irrational exuberance” in the stock market today.  I think he is right — long term.

The market needs to stop going up in the short term and start consolidating its gains, or it will not be sustained.  The Dow has now risen for ten straight days, for the first time in seventeen years.  That is too much of a good thing!

You’ve been a good bull!  Now, go play in the pasture for awhile . . .

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