Stock market folklore says nobody rings a bell at the bottom of the bear market to tell investors that a new bull market has begun.
However I think we can now say that if a bell had been rung it would have been on 22 January when the US Dow Jones dropped to 11,634 and the FTSE 250 to 8,903. An unrelenting stream of bad news including the dramatic collapse and rescue of Bear Stearns and bear raids on US investment bank, Lehman Brothers, and UK mortgage lender, HBOS, sent markets down for a test of the January lows but they did not fall lower and have since enjoyed significant rallies.
The failure to reach new lows in March despite all the bad news is highly significant. An old chartist friend of mine, Eustace Storey, argued that every bear market ended with what chartists call a ‘double bottom’. Shares fall, rally, fall again, bottom out around the level of the former low point and then rally.
...
