We don't know and neither do they.

Beware The Consensus

Stepan N. Stool, PH&D March 6, 2001

Regular readers know that Dr. Stool has projected the current action as a ten week cycle low, with a nasty little rally phase to precede the big dump to Dowager sub 10,000, Nasty sub 2000, and SPX sub 1200.

Suddenly, Dr. Stool finds he has lots of company. Now the consensus isn't always wrong. It just depends on which way it is moving. The shifting consensus reflects the movement of the underlying portfolio assets run by the consensus makers, to, from and between asset classes.

So the consensus makers suddenly are looking for a good reaction rally, before a final bottom in mid year. Uh oh! 

Based on proctologic probing into the depths of bear market  psychobabble, Dr. Stool concludes that the consensus makers will be wrong on both counts.

The charts say that the shift of assets out of stocks will be long term in nature. Ladies and gentlemen, we are in the mother of all cycles. The greatest bubble in the history of the world will not end in a one year bear market. There are precedents, and those precedents say this bear will go on and on and on. The idea of a mid year bottom is just more wishful thinking, because the consensus makers haven't really done any selling yet. But eventually, they will.

Now, Dr. Stool's charts say there will be a wee little rally here, which will again disappoint the consensus. Because in the back of their minds the consensus makers are thinking, I don't really believe this bottom crap, I'm gettin' out on the next good rally. Only problem is, there is no "good rally", because the smart money is selling and shorting every "good uptick." So those good upticks can never pile up into a really good rally.

Oops, suddenly the consensus makers realize, "ain't no good rally coming," so what do they do. Well they start feeling a little shaky in the old lower G-I. Next thing you know, it's loose stools all over the place. The consensus makers spoil their own beliefs by dumping every chance they get. Now that will  eventually generate a good rally, just around the time they expect one, around mid year. But by then upside will be too little too late. Chances are, the rally the poor bastards are looking for won't even see today's price levels.