Tuesday, January 27, 2009

The Coming Of The February Stock Market Bull Run

As most experienced traders already know, February is the trigger-month for long bull runs in the stock market. It seems that whenever bulls finally decide to stare menacingly into the bear-faces of doom 'n gloom, the bears quickly cower and retreat back into the caves from whence they came. Bear hibernation period- at least 5 years.

Every bear market ends the same way. With the same "worst since this" and "worst since that" headlines blasting in the media for a few months- actually "one too many" months- which finally ignites the fury of the bull. Shorts, feeling arrogantly invincible, bashing everything in sight, go head-to-head with longs who have been feeling utterly frustrated and seriously beginning to doubt if the market will "ever go up again."

But, you see, the market always does go up again.

And it happens in February- usually after a good 6 months of "bottom-churning."

Then, the Big Money Players finally decide, "Honey, git the guns 'n wagons- we're headin' due north."

And, just like that, the markets reverse course, and head back up for the next 5 years. So, what finally causes the big money cowboys to "hitch up the wagons and head north?" To me, it's simple. The "short" ("put") trade gets old. And the long becomes the new short.

Since, media headlines always follow the trend (they don't create the trend), the headlines reverse course, as well. Which scare any remaining bears into seclusion- short-squeezed out of town.

This scenario has happened so many times over the years and years- that it's not even worth providing examples. This article is not for those who need to be educated in this regard. It's for those who have been here before. And you know who you are.

Which sectors stand to benefit most? All sectors. Anything remotely resembling DIA, QQQQ, SPY, XLF, XLE. Biotechs. Healthcare. You name it. It's going up.

So. Get your Valentine's Day hearts and wallets ready.

February is the time for the true running of the bulls.

GT McDuffy

(The author has no positions in any of the stocks mentioned in this article)

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