Last Tuesday, a mighty powerful rally swept the market -- big volume, with advancers outweighing the decliners significantly.

It was yet another confirmation that the sell off was ending.

The thesis I outlined in Ten Reasons to Start Getting Bullish is playing out according to plan: The Fed continues to cut rates, tax selling is over, the Arms Index showed a capitulation, and the bad news -- some really horrific news -- is already built into many stocks.

Belatedly, some desks are finally asking the question: Has the Bear finally gone into hibernation? Remember, I am not a permabull, and made most of my money in Q4 2000 on the short side.

But if you were still unsure that the Bear has been banished (at least for the short term), then this Tuesday (yesterday) gave you an answer -- not once, but three times:

1) The Market absorbed Cisco's horrific preannouncement nicely -- and that was an absolutely miserable conference call -- 8500 layoffs, weak visibility, and the biggest write off I've ever heard of ($2.5 B); We still finished positive. That tells me the worst of the news is already in many stocks prices. A very Bullish sign.

2) Intel beat already lowered expectations by a penny, and more importantly, was upbeat about the second half of the year. After the close, the stock traded up over 10% -- Bullish again.

3) The Industrial Production, after trending down for 5 months, are showing signs of surprisingly resilient -- thus suggesting a potential rebound is already underway. Inventories are down; even auto output was up 7% (of course, rebates and heavy financing incentives were used); -- a moderately Bullish sign.

Now our question shifts to: how to approach the market from here?

I see the Dow running to 10,500, with a little work at 10,250-300. The Nasdaq must fight through 2000 (I think it will be successful) and then up and onwards to 2300.

If you are a shorter term swing trader, there will be ample opportunities TODAY is the day to take some profits, and wait for a pullback for a re-entry point.

The longer term investor who made some smart purchases over the past month now has a cushion to weather the back and filling that will show up over the next few months.

Its the intermediate guys that have the toughest question: immediate profits, or the possibility of more gains. For those of you who aren't sure, let me suggest the following: Sell half of winning positions into today's strength to lock in gains, and hold the rest for the run to 2300.

Let me leave you with one last thought:

We are still expecting another half point cut from Easy Al on May 15.

Shortly after that point, I will refinance my home at 6.95%. That will save me nearly a $1,000 a month.

Guess where that extra cash will go? In no particular order: restaurants, clothes, cars, home construction, appliances, CDs, software, travel -- in short, into the national economy.

Now multiply that by 10 million refinancings or so. You can see the impact of Fed cuts -- as the economy bottoms -- on the future of economic growth. That's where the expression comes from : Don't fight the Fed.

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I've gotten some interesting email questions

Is this another bear trap for those going long?

A "bear trap" is a rally within a bear market, which is fast and powerful, but ultimately fails.

The recent rallies -- which have been a confirming, not failing factor --are instead traps for bears.

If you are relentlessly bearish, meaning you still think that the Nasdaq is going to 500 and the Dow is going to 1200, and you are short no matter what macro signals we have seen -- then you are getting utterly crushed in this market.

Anyone who has been short from 4/4 til tomorrow is getting their ^&*(%$ squeezed. Remember, bulls & bears make money but pigs get slaughtered.

I play the short side regularly -- I either got stopped out or closed all my shorts around 4/4. My motto is: if it ain't working, stop using it.

That why I find both the permabulls and permabears so amusing: Joey Baggadonuts from Gruntal all over TV at Nasdaq 5100 saying buyBuyBUY; and now we have the flip side: David Tice from the Prudent Bear fund all over TV saying sellSellSELL!

Since Tice went bearish in '96 (At Nazz 1000 and DJIA 5000) I've been bullish and bearish12 times over. This guy is one money-losing SOB, committing himself to ONE SIDE OF THE MARKET for half a decade. Its amazing he has any credibility. Its like a Superbowl Disneyland commercial:

"David Tice, you were short and wrong for a 500%, multi year (half decade) move against you, and you just caught a 9 month move down -- where's this market going next?"

"Um . . down some more?"

Guys like this are an important reminder: Being a bull or a bear is not a declaration of religon or party affiliation for life: Its a mere outlook, an approach to the market based upon reading signs which are very visible.

Flexibility is the key to success in these markets . . .

If you would like a free subscription to my bi-weekly market comments, please send an email to email to Ritholtz@aol.com, including the word "SUBSCRIBE" in the subject matter line. Previous market comments are archived here.

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Copyright © 2001 Barry L. Ritholtz, All Rights Reserved worldwide. May not be copied, stored or redistributed without prior, written permission. Home

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