Canadian Business Blogs | Advice on Investment in Canada, Stock Market, Small Businesses Opportunities » market bottom

Did we just hit bottom?

Jeff Sanford — Tue, 10 Mar 2009 15:16:25 +0000

I posted a column last week in which I repeated stock market analyst Harry Dent’s call that markets would soon start their strong post-crash rally.
At the time Dent was looking for a bottom, and with the Dow dipping below 6,500 over the last two days, he seems to have it. Dent has just sent out an update to his subscribers suggesting yesterday represents the market bottom for this cycle and that we’re on our way to the long-awaited bounce so many investors have been counting on.
Dent likes the idea that it was financials and banks that rallied yesterday while the rest of the market continued down. It has been the banks and financials that have brought the markets down since the lows in November, and it will be banks that lead us out he says.
The market is already bouncing strongly this morning; the Dow is already up a strong 300 points this morning. This is it says Dent. “Oil is clearly breaking out while gold continues to break down. More aggressive investors should buy here on any pullbacks,” Dent explains. “More cautious investors may want to wait for further confirmation with a break above 7,100. The sectors that will lead will be financials, emerging markets, Asia/China and oil/energy.”

Small-caps primed for take off

Larry MacDonald — Wed, 19 Nov 2008 10:53:55 +0000

The rebound off market bottoms is usually explosive for small caps. Their average gain in the year following the past seven bear markets surpassed 30%, writes Viking Capital CEO John Sartz in the Nov. 21 edition of Investor’s Digest of Canada.

And once in, you might consider staying. Studies by leading academics such as Kenneth French and Eugene Fama find that small caps average 12% annually over the long run.

The current downturn for small caps is the worse of the past seven says Sartz. Small cap indexes are down by over half. Past declines were 28% to 43% from market peaks. The spring back after the 2008 bear could be exciting.

We are in the midst of tax-loss selling season too and a lot of small caps are down for that reason. If past tendencies emerge, January could see good snap back.

So small-cap exchange-traded funds (ETFs) look like good places to deploy funds if you are one of the brave now looking to buy low and sell high. In Canada, there is the iShares CDN SmallCap Index Fund. In the U.S., there is:

• iShares Russell 2000 Index
• iShares Russell Microcap Index
• SPA Market Grader Small-Cap 100
• First Trust Small Cap Core AlphaDEX
• PowerShares Dynamic Small Cap
• RevenueShares Small Cap

The rally that broke the bear’s back?

Larry MacDonald — Fri, 14 Nov 2008 03:06:00 +0000

Markets rallied vigorously on Thursday, Nov. 13, for no other reason than they were testing their lows of Oct. 10. There is a belief among many traders and technical analysts that bear market bottoms retest their lows before beginning a sustained rally, and this belief was what largely caused the major indexes in North America to rebound about 10% from their intraday low just after lunch – even as U.S. jobless claims came in higher than expected and Wal Mart downgraded its outlook earlier in the day.

Will the upturn hold? There is, no doubt, still a lot of bad news in the pipeline. It could arrive as soon as the morning after the “spectacular rally,” with the release of U.S. retail figures. But if a true bottom is in place, at least for the intermediate term as many technical analysts argue, the market will ignore bad tidings and continue to climb. The G-20 meeting on the weekend may also lend support early next week.

The pessimists point to still high interest-rate spreads in the debt markets. And Libor rates are still elevated, and, in fact, have recently reversed their steady decline that commenced mid-October. Credit conditions need to ease more, it is suggested. And Ground Zero, the U.S. housing market, still shows few signs of bottoming out: inventories of houses for sales remain high, as do defaults.