Earlier this month the stock market heaved a sigh of relief. The gains were widespread. The broad-based Wilshire 5000 is up 38.66 percent or $3.2 trillion from the market low of March 9.
There's a growing consensus that the worst of the economic news is behind us, and that a rebound in the economy can't be far behind the rebound in the stock market. File all of that under the heading "Everything Is Relative."
The unemployment numbers were bad. But not as bad as expected. (Tell that to the 539,000 people who lost jobs in April.)
The banks need to raise "only" $75 billion in capital. (Tell that to the taxpayers who have already come up with billions in TARP money, and to the shareholders whose stake will be further diluted.)
Consumer confidence has rebounded from its all-time low at 37.7 in January, to 39.2 in April. (Tell that to those who confidently purchased homes or stocks back in June 2001, when the index stood at an all time high of 118.9.)
Home prices fell "only" 19.6 percent last month. (Tell that to a homeowner trying to refinance a mortgage that is larger than the value of the house.)
When it comes to the economy, everything is relative. We are relatively a lot worse off than we were a year ago. But some of the statistics are relatively better than they were a few months ago, when so many people feared another depression.
Bull market? Bear market rally?
The stock market has chosen to focus on those relatively better numbers, because the stock market always looks ahead. But is this a new bull market -- or just a temporary rally, an opportunity to sell stocks before another collapse?
A well-known Wall Street money manager said on Friday: "This is a "once-in-a-generation opportunity to get in at prices that haven't been as good since 1982." One stock market sentiment indicator has gone from only 2 percent bulls to more than 80 percent bullish in just the past two months.
The bulls are running. But two legendary traders beg to differ. They each correctly timed this "bounce." But neither feels it will last much longer.
Elliott Wave Theory: lows ahead
Bob Prechter is a stock market technician, meaning he charts historic stock prices and patterns using the "Elliott Wave Theory."
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