The bears are now proving themselves wrong, says short-fund guru Doug Kass.
The stock market is showing signs of improvement, Kass says.
“Indeed, the conditions of the recent low were different than others — in sentiment, volume, number of new lows and in intensity,” Kass wrote on The Street.com.
“The move from the October lows to the March lows indicated growing fear and gave way to rising cash positions and the loss of hope, but the market's internals were improving.”
Kass points out “the combination of last Tuesday's 12:1 ratio of advancing stocks over declining stocks coupled with that day's 27:1 up-to-down volume ratio has not occurred in almost 65 years. Remarkably, yesterday was the fifth 90 percent upside day in March, which is clear evidence of a broadening market.”
The market’s negative sentiment is not based on any hard facts, Kass says.
“A classic ‘wall of worry’ is being reinforced by an overwhelming consensus that the recent advance was a bear market rally,” he says.
“Moreover, the negative chatter appears loosely constructed and fails to credibly argue against the salutary effect that $4 trillion of stimulus will have on the domestic economy.”
Yet, there is no guarantee that the economy will rebound by the end of the year, notes Janet Yellen, president of the Federal Reserve Bank of San Francisco.
"We face serious challenges as we try to right the economy, and the resumption of growth that we expect by the end of 2009 is far from assured," Yellen said in a speech.
"The best hope for recovery lies in a diversified array of effective fiscal and monetary policy programs."
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