Tuesday, July 19, 2011

5 Stages of Grief for Optimistic Dyslexics

Laszlo Birinyi remains one of our favorite market prognosticators with his willingness to literally stick his neck on the line with very bullish calls that the market will at least exceed 2,000 in the next 13 months. In other stories, he has even predicted the eventual bull market could top out around double the current level.

Considering the typical analysts will hardly predict 1,450 on the market much less 1,500 his prediction really sticks out. Most analysts still debate whether the market will avoid another recession and anybody predicting doom and gloom obtains more press coverage.

Below are some details and a clip from his interview on Breakout. My only concern is that uber-bear and host Jeff Macke sure appears to be turning bullish. Or at least he doesn't push back on Laszlo that much allowing his bullish case to remain unscathed.

Birinyi puts the market into context via a model which categorizes a bull move into a template of four phases. Think of it as the 5-stages of Grief for optimistic dyslexics:


The Take off / Strong Rally: Nobody believes. March 2009, S&P 666. I don't think I need to elaborate.


Consolidation and Digestion: The skeptics see a return to darkness. In the situation today, consider this: The market is higher for the year. Turn on your television for as long as it takes you to feel dark about the future. Long enough to hear about Rupert Murdoch's News Corp (NWSA) Watergate moment, Cisco's (CSCO) lay-offs, or the collapse of Europe should be sufficient. Turn off your television and ponder the news versus stock disconnect.



Acceptance and Capitulation: Investors surrender to the idea that there will never be a meaningful pullback and start getting long accordingly.


All In: Everybody's long; a life-altering, vicious sell-off begins.




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