How Much Juice is Left in this Bear Market Rally?

Posted by Bill Bonner - The Daily Reckoning

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Since it peaked in 2007, the UK stock market lost 60% of its value. As of yesterday, it had recovered half of what it had lost.

All over the world, the story is about the same. Markets have recovered half or more of what they gave up.

The US is a laggard. While the S&P is up 60%, the Dow isn’t yet at the halfway point. Some foreign markets, meanwhile, have 100% + gains.

Fund managers who missed the rally are kicking themselves. They’ve failed to keep up with the benchmarks.

Even before the market headed up in March we echoed Richard Russell’s words: “One of the surest phenomena in the financial world is the bear market bounce,” he said. We also guessed that the bounce would go to about half the previous losses. We based that on what had happened after the Crash of ’29.

Well, we’re still not there. But an analyst from Morgan Stanley tells us that markets tend to do better than that. The typical bounce is about 70%, says he.

Whew! That’s a pretty serious bounce. If we’d known it was going to be that big we would have encouraged dear readers to bet on it. Instead, we judged it a dangerous countercurrent…like a back eddy or rip tide. Yes, it can take you places…but not necessarily where you want to go!

Our outlook here at The Daily Reckoning is very long term. We don’t like betting on countercurrents…even important ones. Instead, we like to go with the flow…and keep going with it until it arrives at its end.

That’s not as easy as it sounds.

In 1999, it looked like the bull market had come to an end. We…

….read more HERE.