The Last Stages of the Record Lengthed 2003-2007 Bull Market.
When the DJI surpassed 18000 in October 2006, it went into all-time high territory,
The path of least resistance was then UP. In the months that followed, prices seemed
to advance with barely an interruption.
The last stage of a bull market is often exciting. The market goes up and up. People
become convinced that prices can only rise, all dips are buying opportunities and
if one has patience, any loss will become a profit. This is the way the small investor
gets invited to join the party. Shrewd professionals typically sell into such strength or
make plans to quickly sell when the uptrend ends.
Setting the stage for a new bear market, the US SEC did what Gokdnam Sachs and other
hedge funds had been secretly lobbying for. The hedge funds knew very well that by
July 2009 the then 55-month old bull market was on its last legs. (The DJI had not had
a correction of 10% for more than 4 years, a record length.) On July 7th, the SEC rescinded
the Depression era Rule 17 CFR 240.10a-1. This was the rule that banned short selling
on down-ticks or zero-down ticks. It had been established to prevent bear raids, such as
those worsened the 1929-1932 bear market, in which the DJI lost 87% because of pools of unscrupulous short-sellers, many of whom spread malicious false, negative rumors
to destroy investor confidence, not caring in the slightest that they were also destroying
jobs and savings. The SEC's cave-in to the wishes of reckless Wall Street tradersat the
expense of the investing public and Main Street was typical of "regulators" ay this time.
So, traders once again could sell short stocks on down ticks or zero down-ticks. In two
years, it would be apparent that this would be a terrible mistake and would cost millions of
investors TRILLIONS!
