What could be a catalyst for a 20-30% rally?

[stock_trad3r]

The euro is surging on news of Germany economic relief programs. Honk Kong aslos surging.

We could get a 30% rally if the dollar tanks and inflation begins to picks up.

That will stick the final nail in the coffin of the deflation spiral myth.

 

[charts]

.. be careful what you're wishing for ... it might follow after a 20%+ drop caused by who knows what ...

 

[sumosam]

Largest rallies occur during bear markets. Sharp, sudden. Agree that this bear will last a decade...but expect a wild ride....the vix got to over 80 last november...loved the trading opportunities.

 

[Copernicus]

Quote from neutrino:

What do you think could be the news that has the potential to spark a 20-30% rally in this market?

I think (though I may be wrong), that the market cannot turn without a catalyst. Remember the reaction after the first 700bn bailout plan was rumored back in September?

What if they finally announce a detailed plan for nationalization and reorganization of all banks? This should theoretically be the bottom, because all equity holders and most bond holders of banks will be wiped out, and there will be no more losses to recognize at that point.

This may or may not be the long term solution we need to get out of a recession, but could very well be the end of the bank and liquidity crisis? And this is an interesting observation - prices may not be too far from their top, so we didn't lose that much in terms of price, but in terms of duration and time, we are in a bear market for nine years already.

Value houses putting capital to work drawing others afraid to miss the boat...with market moving up the negative end of the world stories dont appeal to everyone as much... they want to believe the end is near.... maybe little joe starts getting in as well.... throw in few earnings suprises on estimates which have been cut down for end of the world scenario...of course someone could also solve cold fusion tomorrow

 

[DrPepper]

Quote from stock_trad3r:

this selloff is due to a lack of confidenece; not bad fundamentals.

Not bad fundamentals? Record levels of unemployment dating back over 50 years. Astronomical, unprecedented levels of government debt. Record numbers of foreclosures. Estimates of historic numbers of bank failures. This sell off is due to a lack of confidence due to horrible fundamentals. I am looking for another 20-30% decline in this market, not a rally.

 

[S2007S]

There is no catalyst, as I have been saying there doesn't need to be a catalyst to push the markets higher in a bear market. There will be sudden rallies in this market, don't be fooled though, this bear market will be here for many years, I predict at least a 7-10 year bear market, this market will trade sideways for many years as economic growth stalls.

 

[S2007S]

Quote from DrPepper:

Not bad fundamentals? Record levels of unemployment dating back over 50 years. Astronomical, unprecedented levels of government debt. Record numbers of foreclosures. Estimates of historic numbers of bank failures. This sell off is due to a lack of confidence due to horrible fundamentals. I am looking for another 20-30% decline in this market, not a rally.

Markets will break new lows, I see the SPX breaking down towards 700, I do see 600-650, however we will see strong bear market rallies of 5-10% that have to be sold. Another 25% drop is definetly in the making.

 

[xtraderx]

Quote from neutrino:

Thanks for the input.

I think the catalyst for the 2003 bull market was the US invasion in Iraq on March 20, 2003. I remember the mood was very negative back then, and everyone was talking the dollar and the war... As soon as the war began, the market rallied.

As I recall sitting in front of my trading screen at the time it was the Iraq War ... in particular the day they tore down the Saddam statute ... and I also think it was the perp walks and arrests of Skilling and company and other CEO's ...

typiclly the perp walks and crucifixion of ceo's and madoff types come real close to the bottom ...

 

[neutrino]

Quote from MrDODGE:

Taking away mark to market rules is the only thing I can think of right now. The Fed and government have already shot their other bullets.

This is a good candidate for the type of catalyst I am talking about, although it would practically create zombie banks. Either this, or nationalization. But I don't think any long term investors or hedge funds will run to buy banks (or cover shorts), if they fear a possible nationalization. Same thing for private capital. Once it happens however, the will be no more uncertainty. In a bank crisis, someone has to step in and recapitalize the banks. In the 1907 panic, it was a group of bankers led by J. P. Morgan and the US Treasury (there was no central bank). Unfortunately it was not a one day event, but a process that took about a month before the market turned. During the month after each problem was solved, a new problem emerged. The Dow Jones index fell a total of 50% in that year.

 

[nutmeg]

Using the '03 reference point, many of my favorite stocks are not priced at '03 levels (yet). Or let me rephrase that, there seemd to be a boatload of stocks opps under $10. There must be some underlying support.