Bear Traps

The Credit Strategist Blog

The late, great Richard Russell, editor of the Dow Theory Letter, repeatedly warned that bear markets lure in as many victims as possible. The way they do this is by staging impressive bear market rallies such as the one that started yesterday and is continuing today. The sharper the rally, the more obvious that it is driven by unsustainable factors like short-covering and short-terms shift in sentiment (better described as market schizophrenia.