There is chatter about a re-test of the January 22, 2008 lows. Mark Hulbert writes a nice article about the re-test theory and how many practitioners believe it. His analysis found that many newsletter writers are unwilling to declare the lows are in for the year, and how that is good! Hulbert is taking a contrary view here, in the sense that since his research points to many don't believe a low is in and a re-test is necessary - which translates into these very same newsletters are then, by definition, bearish to slightly bearish, and invested accordingly. If you are expecting lower prices, then you are either short, in cash, or hedged to a certain degree. Therefore, your opinion can change two ways, one from bearish to bullish, or from bearish to depressionary.
My take, we are in a global boom, and the odds of depression are very low. Therefore, the direction of those bearish is more likely to change to bullish, or at least a move to neutrality. Therefore, the next trades for those particular investors presently expecting lower prices are to either buy back their short positions, or to invest their cash in long positions. In some sense, this creates a sort of backstop for the market, since other evidence supports other broad groups of investors presently in bearish modes as well.
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