The past decade has seen the end of two market manias: First in 2000, then in 2007. We're now in a third.
Will the third time be a "charm," and avoid the fate of the previous two? Some people think so. We've actually heard talk that the rally is not even half over, that it's a young bull market. (We do note that some who say that now did not express this opinion in March 2009, when the rally truly was young.)
This optimism over a prolonged rally would be more understandable if the market had motored higher recently. But in fact, the S&P 500 has gained virtually nothing in the past three months.
"Last month, advisors polled by Investors Intelligence set a multi-year record for a leap in optimism, from a high level to an even higher level. We find it curious that investor psychology keeps becoming ever more optimistic, as if the market had been racing, rather than crawling, to new highs."
You can hear and read all sorts of reasons about why investors are optimistic: the economy is improving, the credit crisis is over, the market is ignoring bad news, etc., etc.
Yet as the latest Theorist observes:
"Ignoring bad news per se is not bullish; this is a narrow truism useful after a long decline when a market turns up despite pessimism and worsening economic news. But it doesn’t work in bear market rallies such as in 1968 and now. The economy is not accelerating; it’s been slowing. The credit crisis is not over; in fact, the worst of it lies ahead."
Once again: if the markets and economy were firing on all eight cylinders, "the rally is less than half over" mantra would make a lot more sense.
How about the bigger technical picture? Where are we in the market's key up/down cycles? What is the Elliott wave structure showing us?
Prechter also tells you about the possible significance of dates that are months and even years in the future -- such as January 2012, and even 2016.
As for the present, the "third mania" has mesmerized many investors. We strongly suggest that you take the time to gain perspective on this mania by looking closely at our charts and carefully reviewing our thought provoking technical analysis.