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winner69
17-08-2007, 01:02 PM
Essentially winner69 is a long term investor, ie wants to maximise long term returns) but also hates losing money

Winner69 has a strategy:

Since 2000 the underlying hypothesis about long term market conditions that drives my investment habits have been


The US market commenced a secular bear market period in 2000. This followed a secular bull market that run from 1982-1999
In a secular bear market long term returns are essentially zilch, even though there can be periods when the market can go up more than 20% in any one year.
Secular bear or bull markets have in the past averaged 13-14 years
By implication the NZ market is tied to these long term trends


Winners investment strategy is:


Because long term market returns will probably be very low become a stock picker and pick long term growth prospects based on fundamentals.
As market sentiment is stronger than fundamentals and hope only hold stocks that are trending upwards. During times over real market weakness tighten up trailing stops (essentially the Phaedrus long term trading strategy)
To maximise returns while retaining some degree of diversification perferable number of stocks is 5, but no more than 10 at any one.
Don't worry about portfolio weights - because all stock picks will be trending up
Because I understand NZ and Autralia markets and economies restrict stock picks to these markets
Do not be embarassed to be 100% cashed up if necessary



Whats happening now

In December 1999 the DOW was 11497 - currently 12486 -- up 8.6% over the last 7 years is some effort eh .... see what I mean about a secular bear market .... about half way one through I guess.

Since and inc 2000 the DOW has had 3 up years and 4 down years.... this year prob a down so the score is 3/5 ... see what I mean about a secular bear market

The current downturn is only adjusting for the recent 'bull market' correction that occurs during secular bear markets - and this downturn is only 10% off a high so probably has a lot more to go

Both the NZ and Aust markets have performed much better over the last few years and are currently valued at PEs seen at the highs of market valuations ..... nowhere where they end up at an end of a secular bear market.


Result of all - as of today nearly cashed up .... and not embarassed at all

Lizard
17-08-2007, 01:26 PM
Out of interest, does the fact that you are now nearly fully cashed up mean that your existing stock picks did not meet your selective stock picking criteria? Or were they no longer trending up? Or have you sold stocks that met your criteria and are still in a long term uptrend, despite your plan?

ratkin
17-08-2007, 01:28 PM
Seeing as you recomended me a book the other day i shall return the favour Have you read the Agressive investor by Colin Nicholson? sounds as if you have a fairly similar strategy. Well worth the read

Mick100
18-08-2007, 12:31 AM
I believe we have been in a secular bear market, in general stocks, for the past six yrs as winner has stated.
But if you dig a bit deeper you will find that commodities are negitively corellated to general stocks. When general stocks go into long term bear markets (15-20 yrs) commodities go into long term bull markets - Have a look at charts of the CRB index and the DOW from the late 60s to 1981. this pattern has repeated itself over and over for the last 200 yrs.

Look at a chart of the CRB index since 2001
Look at a chart of crude oil since 2001
Look at a gold chart since 2001
Look at any of the base metal charts since 2001
Then have a look at a chart of the s&p 500

Commodities are going up, general stocks are going sideways
,

Heavy Metal
19-08-2007, 12:24 PM
Whats happening now

In December 1999 the DOW was 11497 - currently 12486 -- up 8.6% over the last 7 years is some effort eh .... see what I mean about a secular bear market .... about half way one through I guess.

Since and inc 2000 the DOW has had 3 up years and 4 down years.... this year prob a down so the score is 3/5 ... see what I mean about a secular bear market

The current downturn is only adjusting for the recent 'bull market' correction that occurs during secular bear markets - and this downturn is only 10% off a high so probably has a lot more to go

Both the NZ and Aust markets have performed much better over the last few years and are currently valued at PEs seen at the highs of market valuations ..... nowhere where they end up at an end of a secular bear market.


Result of all - as of today nearly cashed up .... and not embarassed at all

In claiming we're still in a bear market you use a very convenient time frame to make that assumption. Using the same analogy gold has been in a secular bear market for the past 27 years - price still lower than in 1980, more down years than up.

Three of the four down years occurred in 2000-02. That was a bear market. Since then the market has three out of four up years. That is a bull market.

The Aust market is nowhere near a valuation high. Current PE of 13 is lower than the 15 year average.

Being able to move to 100% cash might be easy and realistic and comforting for a small time investor, but if you have large sums of money invested across the asset classes (incl property), it is far more difficult to achieve this.

Halebop
19-08-2007, 01:05 PM
The Aust market is nowhere near a valuation high. Current PE of 13 is lower than the 15 year average.

You've just committed the very same crime you accused W69 of.

The Australian market is now made up of a quite different earnings mix thanks to a multi-commodity boom. This boom hasn't been in play for most of the last 15 years (Quite literally the opposite). On average the earnings of mining companies just don't get valued as much as the earnings of service companies because they are capital intensive and much more cyclical and much more volatile (i.e. in an uncertain world they represent a sector with one of the least amounts of certainty). So a quantitative measure of PE doesn't encompass the qualitative factors of earnings mix, sustainability and volatility. Have a look at service companies... insurers, retailers and the like and PE ratios are hardly enticing.

...and conversely even if we ignore the mining factor the overall PE might just be measuring the market's view of future earnings, future inflation and future discount rates.

winner69
19-08-2007, 01:27 PM
In claiming we're still in a bear market you use a very convenient time frame to make that assumption. Using the same analogy gold has been in a secular bear market for the past 27 years - price still lower than in 1980, more down years than up.

.


I would contend the secular bear market in gold you mention ended in mid 1999 ...... during that period gold went from $850 to $250

Since then I would say in the early stages of a secular bull market ..... rising from that $250 to you never know ..... one of the characteristics of a secular bull market being that the bull market periods have greater gains than the bear market periods (like the years you mentioned)

Anyway as with aspects of technical analysis (as this is what this) everything is open to interpretation. Like some might also say that that the secular bull market in US stocks that most say ended in 2000 is actually still in existence becuase new highs are being reached

What you have pointed out about gold confirms what Mick pointed out - stocks and commodities always seem to go their opposite ways


By the way your other point that closing positions can be difficult is true .... and this does to a certain extent eliminate many stocks as a possible trade if I keep the number of stocks held down to a preferred number of 5 with a max of 10 ..... even the biggest exposure I have had in this respect is that I managed to move a sizable parcel of TRS a few weeks ago without too much difficulty (prob sold a few of shares to Fisher funds over the years)

Heavy Metal
19-08-2007, 02:26 PM
Yep interpretation is everything. One can choose the time period to validate their arguments.

You say Dow is in a 7 year secular bear market, I say Dow is in a 4 year secular bull market after a 3 year bear market, some say gold in 27 year bear market, Dow in 25 year bull market etc etc.

Interesting re TRS - great stock but very illiquid. No problem moving $10K worth but what if you bought $1M at IPO and/or accumulated $1M over the time since the IPO? Ditto housing, you have to wait months to try and sell if things go sour, or have a fire sale. And this correction has only lasted 4 weeks!!!

Also interesting to compare this correction vs a similar credit crunch episode in 1998 (LTCM/Russian debt crisis). Market retreated 17% but recovered its losses within 5 months. The 1998 correction started around the same time of year too.

living2
13-09-2007, 02:38 AM
Can someone else interpret this???Does this indicate writer believes $US will continue down,gold goes up and DOW goes up????http://biz.yahoo.com/seekingalpha/070909/46785_id.html?.v=1

Mick100
13-09-2007, 07:23 PM
Can someone else interpret this???Does this indicate writer believes $US will continue down,gold goes up and DOW goes up????http://biz.yahoo.com/seekingalpha/070909/46785_id.html?.v=1

I think he's saying that everything is going to depreciate against gold -USD, DOW, commodities. He say's even if prices of DOW etc keep increasing they will still depreciate against gold

Although I agree with some of what he says, I'v become rather weary of the gold bug writers in general.
.

Heavy Metal
11-10-2007, 12:23 AM
Result of all - as of today nearly cashed up .... and not embarassed at all

Perhaps not embarrassed but still playing catch up when the market quickly recovered and is making record highs.

Those who saw this as just another correction in a bull market who bought more through the correction rather than panicked and sold in the insanity of mid August are sitting pretty and can take big profits at their leisure.

Hoop
16-10-2007, 10:34 PM
Perhaps not embarrassed but still playing catch up when the market quickly recovered and is making record highs.

Those who saw this as just another correction in a bull market who bought more through the correction rather than panicked and sold in the insanity of mid August are sitting pretty and can take big profits at their leisure.

Yes, I was lucky enough to act on Colin Twiggs analysis in August which forewarned the correction and sold down acordingly( just keeping some long term stuff) and then had cash to buy in at the correction. However I was a worried chappie for a while, because the ASX DOW FOOTSIE to which the NZX is running in near tandem with, were seeing their correction values at levels bordering the end of Bull market (phase 3). Seeing these values rise again don't not necessarily mean the BM(3) was still intact it could have been that the market had in fact started a bear market and the market was in wave A (the early signs of wave A is very hard to predict).
My worries have eased slightly seeing the ASX reaching record highs (if only just).
Colin Twiggs thinks the DOW will soon see the end of BM(3). As of today he gives the DOW 50% chance of entering another correction starting now (and the beginning of wave A?). Will the ASX and NZX follow?

On a optimistic note many NZ stocks that topped out during Jan 2007 are looking (from a TA angle) as possible buys and energy stocks are positive.

I am 25% cash at the moment but may raise this level by selling my stocks pointing south at the moment.

With interest rates being where they are (7.5%) it is tempting to cash up more and leave it in my holding account (PIE status- Direct Broking)

Hoop
21-10-2007, 09:17 AM
I may sound like the prophet of Doom, but it seems more people are questioning the whereabouts of what stage of the sharemarket cycle we are presently in.

An article today (http://www.stuff.co.nz/4245636a13.html)makes good reading. Kevin Armstrong, ANZ-National Bank's chief investment officer is worried where the Dow is heading. He thinks it could be heading not to a crash, but a more destructive loss of investor capital through a protracted bear market.

Alan McChesney of NZ Asset Management (NZAM) is more optimistic. He thinks the sub prime crisis and the property market slump will have only a mild effect on the US economy so estimates a soft landing not a crash to occur. However he rates a year + long bear market as a 50/50 call.

If the Dow is entering wave A, (there seems to be mounting evidence that this is going to happen if not already) my strategy as a NZ asset med/long term investor will be to cash up any of my stocks that start heading downwards in price, and not reinvest unless the stock is in a solid uptrend.
In other words I will be tightening up my criteria to reinvest. I expect to be eventually holding more cash than shares.

Hoop
22-10-2007, 03:10 PM
Monday night/tuesay morning (NZ time) I might have a good idea which way the Dow is going to go (it is at crunch point at present) I think the Ords and NZX will follow the decision Wall St determines. Life could be bear. Ready to cash up my worst performing stocks.

Protacted bear markets affect long term investors the hardest so I am using short/medium tactics now, to minimise capital losses.

Hoop
23-10-2007, 08:11 AM
Monday in USA been and gone and after a 100 down start the DOW finished only 5 points down.....so still none the wiser today.
The Dow still remains at the watershed, so the Bull is still alive but looking sick.

Colin Twiggs (http://www.incrediblecharts.com/free/trading_diary/trading_diary.htm) is negative, he expects another correction NOW of at least 10%. He wrote this as at 20th October, and has predicted the previous corrections before they happened.
With the DOW breather today this may present an opportunity to exit some less performing NZX stocks today althogh with the Labour weekend holiday the NZX might be in catch up (down) mode this morning so perhaps wait until ASX opens may be prudent, depends on the NZX opening however as many investors still think it's good times down under.

I think it is time to start departing the market, as the risk is now too high. Money in the DB trading account (PIE) at 7.5% is looking like a winning bet to me.

As at now my portolio is Stocks 80% Cash 20%

Deev8
23-10-2007, 11:28 AM
Monday in USA been and gone and after a 100 down start the DOW finished only 5 points down.....I believe that the Dow finished 44.95 points up at 13,566.97 on Monday. Friday's close was 13,522.02.

http://uk.ichart.yahoo.com/b?s=%5EDJI

Hoop
24-10-2007, 08:10 AM
Yes Deev..I tend to be rather slow in the mornings..it was a quick post and forgot about the day light saving effect..yes the Dow moved up quick in the end of trading and today it is 56 up at the moment to 13623.

It needs to be above 14000 to break the resistence and lessen the downward correction risk.

It's these secondary corrections coming out from the Dow which is causing problems to our markets.

For us to predict the next correction, it makes sense to monitor the Dow very closely (as I am doing).

Edit: another late end of session surge up 117 to 13684 since writing this post.

Hoop
29-10-2007, 10:02 AM
The threat of a secondary correction from the DOW is easing. A good rise on friday to 13807 has to be seen as a positive move from the previous few days of hesitancy and intraday swings. Also the DOW has created a "floor" (resistance level) at 13500).
I am more relaxed now than last week, and if the DOW stays above 13500 I will not be cashing up my worst performing NZX shares just yet.

My Portfolio at Present
AMP (topped up), BRY (singapore shares on negative watch), DFH (bought mid Oct2007), DPC (sold down, may now accumulate (on positive watch)), FBU, FPH (bought end July 2007), GPG (sold down, on negative watch), NZO (topped up), PRC (accumulating), RAK (accumulating)

Watching
NPX(ex share) CEN(ex share) MFT (ex share)

Hoop
06-11-2007, 01:48 PM
Dow failed to breach the 14000 upper resistance and is testing the 13500 support. This is the support line that I am watching... if it falls below the 13450 /13500 area it will be bearish and signal a possiblity of a secondary correction and the next resistence level down is 12800, (-5.5%). Below 12800 is bear territory and would signal the end of Bull Market 3.

I am nervous again. The secondary correction risk has risen.

Have added FBU to negative watch. Any correction will create FBU to break it's very long upward trendline.

AMR
06-11-2007, 02:32 PM
FBU has to fall a long way to break the uptrend line - Phadreus has done a post over on the NZX forum. The resistance in the 1110s-1120s held up nicely today. If that had broken, FBU would have made a scary looking 6 month double top pattern.

Hoop
06-11-2007, 10:11 PM
FBU has to fall a long way to break the uptrend line - Phadreus has done a post over on the NZX forum. The resistance in the 1110s-1120s held up nicely today. If that had broken, FBU would have made a scary looking 6 month double top pattern.

A little confused about your statement XX. :confused: As I see it the uptrend line on Phaedrus chart will be broken at $11.15 or thereabouts as well as that resistance.

If one uses a linear graph the uptrend line break is around the $10 mark, is this what you are referring to?

Agreed FBU held up nicely today and the market in general closed stronger to be just down, which is positive news for FBU.

Hoop
08-11-2007, 12:22 PM
Dow finished at 13300
Dow broken down through 13500.
This is bearish, a better than average chance that it will test the major support level of 12800 (-4%)

Warning signal for another correction.

How NZX is going to withstand this I'm not sure, its been rather resilient lately.
I'm cashing in some stocks just in case.

AMR
08-11-2007, 04:46 PM
Ditto, I was quite nervous watching the Dow plunge 60 points in the last half an hour to end up around 350 points down. What worried me about this is correction was that it was not confined to the financials. The SP500 also broke below 1490.

To answer your question, what I meant was that it has to close below the price and not just touch it intra-day. I think the closing price on the day was at around 1140 or so. I was only long for a day or so before I sold out.

I'm now looking to trade stocks predominantly from the short side. The Hang Seng index looks like it would be good to short soon.

Hoop
08-11-2007, 11:42 PM
Yes XX hang Seng seems the most volatile with big swings

Got an Automated email from Colin Twiggs newsletter (http://www.incrediblecharts.com/free/trading_diary_archives/2007-11-08_yields.htm#spreads) at 6.10pm thusday saying nearly word for word what we have said.

It seems all the Ducks have lined up in a row on this one. Colin Twiggs has monitored The DOW, S&P500, FTSE 100, Shanghai composite, Aust all ords, they all have broken key supports and signaling a secondary correction.

Sold out of GPG and sold 1/2 of my FBU (my key stock) yesterday.
Gone from 20% to 30% cash. Wish it was more, but I don't know which stock to part with.

Some large sellers were in the market, that is never a good sign.
Warning

Hoop
12-11-2007, 12:54 PM
The NZSX50 has dropped 3% since the warning.
I have cash up my weaker stocks, ahead of the fall.
Now I look at the overall picture of how far this correction goes.
The good news that there seems to be buying amongst the gloom in the DOW so commentators give us a 50% / 50% chance that the key support of 12800 will hold. This means another -2% to go at best.
The bad news is that the Nikkei is now a bear market.

I orginally focused on the DOW to look for the correction warning....I now focus on the NZSE50 graph as I mainly invest in NZ stocks as this becomes more important once the warning has be identified. Points to watch is the break in the 5yr trendline somewhere around the 4040 mark and more importantly the key 3900 support line. If NZ follows USA market then another -2% brings the NZ market to about 4020 and bouncing on the trendline but well within the 3900.
So to deduce the statistics, if the Dow holds up above the 12800, the NZSX50 is OK, and I may buy back my just sold weaker stocks, ( FBU and GPG ) and go on stock watch positive

If the DOW falls below the very important 12800 the NZSX has a -3% buffer before it breaks a key support. Then the all important support is at 3500. (-12%)

If the NZSX breaks the 3900 I will eye up my long term stocks and sell as they break their uptrend lines.

Stocks 65% Cash 35% ( should be cashed up more but awaiting half year reports).

Hoop
14-11-2007, 11:48 AM
Dow back up past 13300 needs to be above 13500 before I become positive again that the latest correction has ended.

Good to see that both NZSX and FBU have had gains and have respected their trend lines.

Although I sold half of my holding in FBU at $11.69. and FBU seems to be bouncing back up again( $11.57), I still regard the saying "rather be a live coward than a dead hero". A lot of rumours flying around about a big correction waiting to happen...whether it happens or not is not the issue...the issue is that if one can pick the signals of an impending correction then one should react to it.

FBU back on my positive watch
GPG watching

ratkin
17-11-2007, 05:20 PM
I force myself to buy when im not positive.

We all have a tendency to want to buy when feeling good about the markets , better to buy when full of gloom and doom. Not easy to do but i find it works better.

Hoop
20-11-2007, 10:24 AM
I force myself to buy when im not positive.

We all have a tendency to want to buy when feeling good about the markets , better to buy when full of gloom and doom. Not easy to do but i find it works better.

I am not positive about this market. Yes I do buy in doom and gloom (bear market 3) but we are not in doom & gloom we are in heightened expectation at bull market 3 /bearmarket wave1, can not distinguish which at the moment, but I know from past experiences that I always seem to lose money in the BM3 phase and this one has been no different to me, except that I have indentified the historic signals and have reacted accordingly...therefore losing less than I would have otherwise by forcefully selling out earlier than I would've normally. This BM3/Wave 1 is a period when I hold thinking things will bounce back (as my stocks seem financially sound) and continue upwards only to be disappointed by my companies report back that due to outside factors they are not meeting there forward targets. RAK is a good example of this.

Overnight the DOW fell through a slight resistence and pyscological level of 13000 level...it wil now test the big primary support 12800. Likewise with FTSE and S&P all testing their primary support levels.
My gut feel is that these primary supports have a good chance of failing. OK I'm a pessimist, but their is no harm in selling as I can always buy back in.
Sold RAK yesterday at $4.48 for a small overall loss
Selling AMP (another of my major long term stocks)
The rest of my FBU is on negative watch
Gone from 13 to 7 stocks in my portfolio this year
50% cash

Hoop
22-11-2007, 05:48 PM
Dow at the watershed...closed 12799. Where to from here...up or down. If down expect a harsh correction to 12000 ?? (another 7%)
Long weekend for them thanks giving tomorrow friday.
My Cash now at 54%.

Hoop
23-11-2007, 02:34 PM
I personally think the DOW will go bear next week. I've cashed up more NZ stock with overseas exposure. Sold the rest of FBU and FPH
Mainly NZ exposure only stocks left
Cash 63% shares 37%

Hoop
26-11-2007, 12:54 PM
From my 13 stocks in my portfolio just a couple of months ago I now have 5.

Many commentators(mostly chartists) have (the last few days) publically come out now announcing warnings. I did this on the 8th November. The fundamentists are still bullish believing the PE Ratios profits, etc, etc are at levels which would soften any downturn, if any,and the correctin will quickly turn around.
Personally PE Ratios mean "diddly squat" when people start talking about severe corrections and crashes. As history repeats itself I remind people that the Dow average PE Ratio has been as low as 4 and high as 42. It is at about 14 now and isn't far from its so called norm of 11 but you can't judge the norm as being normal when basing on buy/sell decisions by spooked investors. In times of high growth and optimism a PE of 20 looks cheap and in times of deep recession and gloom 10 may look expensive.

On Friday we saw the DOW rise on very low turnover (1/2 day of trade) I don't know the correct phrase but noticing the sell signals I would tend to believe that this is the sucker rally before the drop.

Commentators with very good facts and figures are showing up now, so it's best to see those numbers Phaedrus and Colin Twiggs (http://www.incrediblecharts.com/free/trading_diary/trading_diary.htm) are presenting. These two chartists should be listened to closely as I find they are correct most of the time in what they say, and at the moment they are singing the same tune.

It seems more certain the DOW will fall below it's primary support of 12800. If it happens a double top is formed and this is bearish, the next major support is then at 12000 (-7%).
Also the TA self fillfulling prophecy will kick in if the double top is formed + 12800 support is broken, from history when this activity happens it has resulted in sudden falls.

These sell signals have been firing for nearly 3 weeks, so all the major markets have been kind to us investors, giving us who believe in the signals an orderly exit within each little rally. However I think time is running out.

I think it is time to dust off the text books on investing in a bear market....the title of this thread.

Warning this present correction may get worse... if so the bull is dead.

Hoop
27-11-2007, 10:30 AM
The bull market in USA is over for an indeterminate time.

There maybe a flow on effect into other equitiy markets such as NZX.
If so there is a better than average chance, there will be a sharp fall before the rally at the end of wave 1.

As the DOW and other USA markets are more than likely a bear market now, I will begin to polish up the Principals of Wave theory (wave 1 to 3) and how to best to invest and maximise profits within this new environment. I have forgotten a lot as it has been a long time, except I remember the notorious wave 3 killer.

For the present period (hopefully a week or two, not many weeks or months) I won't buy until the fall has been executed, unless a shinning star stock emerges with exceptional news. All my stops are very tight and will cull my remaining 4 stocks without emotion.
During the next phase a good knowledge of TA (http://www.incrediblecharts.com/technical/easy_guide.htm)is required, so I will try to learn more in this area
I will resist buying into shares that look "cheap" such as RAK, FPH, DFH, NPX etc until the (wave1) fall has halted.
Short to short/medium term hold strategy are my focus in this possible incoming Bear market phase.
Long term hold strategy on any stock during a Bear market is too dangerous for me, and will be abandoned until after wave 3.


Very little chance that the American markets showed a false support break, so I won't get optimistic about that yet. Also note that NZX is not yet a bear market.

My portfolio:..Cash nearly 80%

A bit of interesting historical trivia + graphs from Des2 (http://www.incrediblecharts.com/forums/messages/6/1161422.html) 28th June 2007
Quote...
coincidentally some of the worst falls have been in 1907 (-48.5 %), 1917 (-40.1 %), 1937 (41.5 %), 1987 (-48.6 %) and 1997 (-17.9 %). to avoid being selective it should be noted that 1929 (-47.9 %), 1932 (-86.0 %) and 2001 (-37.8 %) were also bad years.

wonder whether the rule of sevens will apply in 2007?

and..

...One interesting note is that most market crashes are long (lasting over a year) and 6 out of the top 11 crashes started in either September or November.

Note The majority of these falls have been rather large. Some of the large falls are close to those famous crashes of 1929 and 1987.

Hoop
27-11-2007, 02:02 PM
How do you go about shorting an international index? I'm in Australia and use ComSec - anyone know how I would do this?[/quote]

Hi KW
Not my area of expertise ...yet!!. Shorting stocks could be good way to invest in a bear market:D Indices??
Try xxamr-corpxx thread http://www.sharetrader.co.nz/showthread.php?t=5463, or go manually to it under investment strategies section "Dissect my CFD index trading system". Give these people an email through sharetrader link, very good possibility they will help you.

Failing that check out the Incredible Charts Forum (http://www.incrediblecharts.com/forums/messages/12/12.html), there are heaps of day traders here, go into the forum and register and do likewise email through the forum or create your own post with your question

cheers
Hoop

AMR
28-11-2007, 07:35 PM
How do you go about shorting an international index? I'm in Australia and use ComSec - anyone know how I would do this?

I use CMC Markets and they offer an artificial market based on the futures of each index. They offer most indexes around the world. I believe Comsec might provide CFDs for you to short indexes with. Beware though, some indexes are incredibly volatile and due to the amount of gearing required (this cannot be changed) this is quite high risk. I just had my **** handed to me by the Hang Seng...will not touch that thing again for a while until I get my head around trading psychology.

The best way is to approach a futures broker and short the futures. They are generally cheaper than CFD providers but capital requirements are significantly greater.

Hoop
29-11-2007, 11:24 PM
That very little chance of a false breakout below 12800 just got bigger with the Dow jumping up over it to close at 13289, just shy of the 13300 mark which becoming more of an important mark. I will not get excited until the 13500 is penetrated.
The Bulls and bears are fighting it out on the DOW and I will stay out of NZX until a clear trend materialises.
Warning still in place

Hoop
02-12-2007, 11:50 AM
Colin Twiggs (http://www.incrediblecharts.com/free/trading_diary/trading_diary.htm) has indicated that the Dow Jones industrial averages signal a bear market risk using the DOW theory.

If there is a Bear Market, how long will it last?...who knows??
History can point one's investment stategy in the right direction though.

There are doubters at the moment after seeing the Dow Jones having one of it's best weekly rallies for the year....however the situation has remained that there is going to be a false break occuring somewhere but which way? up or down? American Commentators are divided on the issue.

On Colin Twiggs site (http://www.incrediblecharts.com/technical/dow_theory_confirmation.htm) under the DOW Theory page is an example graph of the 1998 bull to bear.
Using the 1998 example the bear market was only 6 months long and using hindsight strategy money in the bank for that 6 months would have been an excellent option. Also note the similarity with the break (2) and the little rally above the support again before the large fall.

If this present rally is true and it signals a resumption of the Bull market, there is plenty of time to buy back in. So being cashed up during this doubtful time, I believe is by far the safer option.

Also the ASX seems a lot stronger.... so if the DOW falls signaling the typical Bear market will the ASX follow? or will it uncouple? How will the ASX affect the NZX? These are uncertain times.

Warning still in place

Equity 29% Cash 71%

Hoop
06-12-2007, 09:10 AM
Good rise on the DOW last night the market hasn't closed but there is a positive mood evolving. The risk of the DOW going Bear is lessening.
DOW is over the 13300 at the time of this posting 13392. (+1.08%)
With this feel good factor the overseas markets have bounced and today I assume it will spread to the ASX & NZX.
Normally I would be in buying, but I will wait until the DOW goes above the 13500 resistence line signalling the end of the secondary correction.

Even if the DOW goes above 13500 I will be watching closely as many strange actions have materialised.
The DOW is defying the TA odds not just once but a few times now..conincidence??? maybe??... Can a rise above the 13500 resistence be trusted??

My little venture into DPC seemed to have paid off bought 84c last friday now 91-95c. The NZ small finance company sector is at Bear phase 3 of the cycle. The destructive wave 3 I think has past (hopefully). Bear (3) market phase can be identified by doom and gloom and low volume trading, good strong companies are tarred with the same brush as the weak failing companies, PE ratios are below the norm. Good profits and yields are ignored by the investor, as perceived risk outweighs the benefits. There is no timeframe as to how long this bear (3) will last for.

In times of bear buy into and sell out of the short rallies.

Disc:
unfortunately sold out the rest of DFH a week or so before its 10% rise yesterday. :(:o

Good news for me was I had my best week of the year last week....right in the middle of a potentially damaging correction phase under my own warning...and mostly cashed up to boot ...how ironic is that.:p

Warning still in place
Equities 29% cash 71%
NZO. PRC. some DPC

Hoop
07-12-2007, 10:38 AM
The DOW Bull has survived against the odds...for now.

DOW is at 13620...broken back through the 13500 so the BULL MARKET is still intact.
So it seems the DOW did a false break. The chances of that happening is low (20-25%??).....So the DOW bull has sort of recovered back from the point of death. Now what? Will the DOW test it's all time high with all the negative data floating around it?

It didn't turn out the be a bear market but the prediction of the correction I issued early Nov proved correct which gives me confidence that I can invest with lesser risk in this uneven parnoid market.

It seems TA wise the warning can be lifted..... but why am I still uneasy???.

I invest mainly on the NZX which has temporarily decoupled from the rest of the markets due to local economic news and the much higher NZ$. So the bargains are hard to find, which will keep my portfolio cash heavy.

Secondary correction ended on the DJI S&P.....
False breaks have happened lately so may be prudent to be cautious

winner69
12-12-2007, 09:57 AM
Well the market didn't like that 0.25% points rate cut ...... maybe reality is coming home to roost

The next few days could be interesting

Hoop - whats your read of the situation?

Hoop
12-12-2007, 10:41 AM
You are uneasy, I am uneasy ...
Its because when the charts start warning of a downturn, it is at least expected, and things "correct" in a nice orderly manner (ie. Jul-Aug 07). Followers of TA know when to buy and sell, and FA investors happily cash up and wait on the sidelines until the see value re-emerge.
When the charts dont show any trend, and the indexes start bouncing all over the place with no clear direction, then we know that any downturn will probably happen as a "crash" and take us all by surprise with no time to get out :-(

Yep very true KW.. 1987 a pure example ..however this bouncing around at the moment would have the TA people on alert, as it is stuffing up their probabilties of it happening percentages with all this false breaking going on. Many FA thinkers think that with the DOW Av PE Ratio at around 16 the crash or a severe correction won't happen..so there is a polarity in thinking happening in the USA between the two disciplines. When they both agree it is on the subject that "if"
it happens it will be brief. However all a FA minded person has to do is to add another dimension and look back through history, analyse the still valid ancient theories like those of DOW and Elliott Wave principles and they will see the warning signs are there for the FA people as well as for the TA.

The last 2 hours on the DOW was not pretty..ended 299 points down to 13428.
This is below the magical 13500 again so we are back to the warning status again. I think it is safe to say now that the TA commentators will affirm that the DOW is in a bear market (dipping briefly below 12800 may with this present DOW falter now being not seen as a false break).

With the latest decoupling of the NZSX50 from the rest, the index number for us in NZ to watch for is 3900. If it goes below this figure it signals the beginning of a bear market cycle here in NZ. (At the time of writing the index is not far from that mark ... 3987 down 40 points).

Many of us know our 3R's in education....Reading writing arithmetic

The modern fad have the 3R's as reduce reuse and recycle.

A good one from a poster (Trader888) excising the 3R's rule in times of market turmoil is to cash up and......rest relaxation and recreation.:)

Hoop
12-12-2007, 10:53 PM
Well the market didn't like that 0.25% points rate cut ...... maybe reality is coming home to roost

The next few days could be interesting

Hoop - whats your read of the situation?

Hi Winner
For some quirkey reason your post seemed to have appeared after my posting today, or I didn't notice it this morning.

If it was due to my inattentiveness then apologies to you is in order when I only responded to KW.

In answer to your question I honestly don't know.

Sorry... here comes the waffle...
I often refer back to history because the markets have a bad habit of repeating itself. As an example the DOW from 1999 to 2001 jumped all around the place (as it is doing now) for just over 2 years before the big one came (big correction or crash take your pick) late 2001 then the bear exited in 2003.
Even looking back in hindsight it is not easy to pick when that bear cycle actually begun as there were 4 corrections before the big one but I think it was the 4th one in 2001, however some might say it was the second one in 2000 followed by an extended period between Bull market (3) and wave A.
It is difficult to detect the end of bullmarket as each correction is followed by a rally and without hindsight one does not know if the bullmarket cycle has ended when each rally reaches a similar top point and each correction sort of respects the previous support or just breaks it and then moves up again (as the DOW is doing now). However analysts can read behaviour, double triple or even quadruple tops are bearish signs as it signifies volatility.
Bull market/bear markets wave theory illustrated in text books is easy to see and it is displays a sort of uniformly in a nice wave pattern, however in real life all sorts of patterns and durations may emerge and to complicate things even more it is not impossible to go from bullmarket(3) miss out the bear market(or a very very short bear duration) and wave straight back into Bull market(1)

This time around I think a bear will emerge if not all ready as the economy in America is going pear shaped.
The $64 question is will NZX see the bears... from recent history we escaped most of the dot com damage but at that time the NZ market was not in tandem with the DOW, this time we and the other major exchanges are.

Yes I will be watching the Dow with interest tomorrow morning.
I wouldn't be surprised if we are still experiencing the same scenario in several months time....equally I wouldn't be surprised if the guts fell out of the DOW tonight

I probably haven't answered your question Winner have I ??:)

Cheers Hoop

Hoop
12-12-2007, 11:54 PM
291

Quote from KW ....If you read the Intelligent Investor by Ben Graham it analyses the US market since it began, and it has spent periods where the average P/E is around 8. So it could halve if the US sinks into a long recession and pessimism takes over....

Historic PE Ratios up to 2004
About 15 at the moment I think


First success at a gif..attachment since swapping to Vista :))))

Yossarian
14-12-2007, 09:19 AM
would be interesting to know what would happen to the DOW if you took out its top 20 - probably not as dramatic but still a substantial effect I reckon.

It's like if you take out the 5 or 10 best index rises of the year, you usually end up with a bad year!

winner69
19-12-2007, 06:56 AM
would be interesting to know what would happen to the DOW if you took out its top 20 - probably not as dramatic but still a substantial effect I reckon.



..... that will leave the bottom 10 stocks then

Will look it up for you

Hoop
05-01-2008, 10:13 AM
Dow ended the day on its major support line of 12800. (down 2.0%)

My Warning been in place for nearly 2 months now. Do not assume the ASX or NZX is exempt. The market over the last 4 months has given the astute investors plenty of time and opportunities to create their necessary defense and quick exits strategies.

winner69
09-01-2008, 09:11 AM
That was a nasty last hour on the US markets

S&P500 under 1400 pretty ominous

What you think happen now Hoop

Hoop
09-01-2008, 10:01 AM
That was a nasty last hour on the US markets

S&P500 under 1400 pretty ominous

What you think happen now Hoop

Winner ...Gee that was a lot of ugly news surfacing out from the States this morning (our time).Rumours about Countrywide has put the skids under the Equity markets.

Well the Dow has broken the magical 12800 resistence big time today. I hope this thread will draw in some TA experts now, but from a part-time TA novice point of view, it kind of looks like the major support of 12000 is under threat now.

I watched with my brother in Law this morning, the death of the DOW Bull, it is beyond all doubt now..it is definitely a bear market.

NZX is my next focus point as it has this morning broken down through the 3900 mark marking a strong possiblity of a secondary correction.

Must go, I have a 11.30am appointment on the other side of town, will be in touch
Hoop

Lizard
09-01-2008, 10:16 AM
NZX - If we are playing "guess the bottom" I have a level at the mid 3700's as next in line to provide an decent reversal. There is a more scary scenario which sees 3120 ish for the low - funny, that seems hard to imagine, but still less than a 30% fall off the high.

Hoop
09-01-2008, 08:33 PM
Received Colin Twiggs trading Diary email 2 hours ago confirming that the DOW and S&P 500 are both in the Bear market phase.

You can see his TA charts here (http://www.incrediblecharts.com/free/trading_diary/trading_diary.htm)

The NZX respected the 3900 support line today on low turmover however telecom gaining 3 cents today and with a high rating within the NZX index has produced a moderating influence.

Winner your thoughts...from your readings..I must admit I have not had time to read anything lately..so the sharemarket drop today has caught me out somewhat.

Liz good to hear from you. Did you notice there seems to be a support level at approx 3450 as well...if it breaks 3900 its between your mid 3700 support level and 3120.


The newTarget index for the break of the 3900 support (if it happens) would be (in round figures) 3900 - (4330 - 3900) = 3470

Thats spooky..:cool:. as there is a support level around that 3450 - 3470 index level.

If the NZX respects the 3900 support line (a high chance that it won't).. I will not feel happy until the index breaks above 4200.

Hope you guys are holding lots of cash or gold

Hoop
15-01-2008, 01:16 AM
Today confirms that the NZX50 is a bear market
a close of 3824 shows a lower low and breaks the support of 3880/3900

Investors should now be looking at Bear market investment strategies for 2008.

A poll (http://www.sharetrader.co.nz/showthread.php?t=5606) on the ASX thread shows at least 49.30% of the 71 investors polled are not using a bear market strategy yet, (maybe some bargain hunters should be included as well) obviously these people assume a return to better times within the short term.
The breakdown;
Bargain Hunters mode 32.39%
Happy Long term/ doing nothing 49.30%



Simple basic fundamentals ....copied from Investopedia (http://www.investopedia.com/articles/01/031401.asp)

Where to Invest in Bear Country (Strategies)

There are a number of things you can do to protect yourself from bears (http://www.investopedia.com/terms/b/bear.asp) - and maybe even eke out some gains. Let's take a look:



Play Dead - Stay on the Sidelines
During a bear market, the bears rule and bulls don't stand a chance. There's an old saying that the best thing to do during a bear market is to play dead - it's the same protocol as if you meet a real grizzly in the woods. Fighting back would be very dangerous. By staying calm and not making any sudden moves, you'll save yourself from becoming a bear's lunch.

Playing dead in financial terms means putting a larger portion of your portfolio on the sidelines in the form of money market (http://www.investopedia.com/terms/m/moneymarket.asp) securities. In a bull market, it is detrimental to have uninvested cash around because it isn't working to get the best potential return. This isn't true in a bear market because cash will hold its value (and earn at least some interest) when stocks head south. When the right buying opportunity comes along, you'll have the flexibility to go for it. Of course, this means you have to be timing the market to some extent, a task that is tough, if not impossible, to do precisely. However, the point is that during a bear market, even if you take some cash out of the market later rather than sooner, this may still prove to be a good decision if the bears rule for a sustained period.
Value Stocks
Bear markets can provide great opportunities for investors. The trick is to know what you are looking for. Beaten up, battered, underpriced: these are all descriptions of stocks during a bear market. Value investors (http://www.investopedia.com/terms/v/valueinvesting.asp) often view a bear market as a buying opportunity because the valuations of good companies get hammered down along with the poor companies and sit at very attractive valuations. However, value investing is an art; not every stock in a bear market is a bargain, but this is a time when some real bargains can definitely arise. Take Warren Buffett (http://www.investopedia.com/terms/w/warrenbuffet.asp), for example. He often builds up his position in some of his favorite stocks during less than cheery times in the market because he knows that the market's manic-depressive nature can punish even good companies more than warranted. (To learn more about the art of value investing check out our Guide To Stock Picking Strategies (http://www.investopedia.com/university/stockpicking/default.asp).)
Short Selling
Another approach to a bear market is to adopt a more aggressive strategy. A short position allows an investor to profit as the stock heads downward. Keep in mind that the ability to profit on the other side of a stock is accompanied by substantial risks, mainly the fact that, in theory, you could lose a lot more that 100% of your initial investment by taking a short position in a company. (To learn more about short selling check out our Short Selling Tutorial (http://www.investopedia.com/university/shortselling/).)
Bonds and Asset Allocation
Asset allocation (http://www.investopedia.com/terms/a/assetallocation.asp) proves itself during times of stock market underperformance. During economic boom times, investors are kicking themselves for not being all in equities. The exact opposite is true during times of economic hardship and stock market downturns. Having a percentage of your portfolio spread among stocks, bonds, cash and alternative assets is the core of diversification. How you slice up your portfolio depends on your risk tolerance, time horizon, goals, etc. Every investor's situation is different. (For more on this subject see the following article: Portfolio Protection In Diversification And Discipline (http://www.investopedia.com/articles/03/072303.asp).)
Defensive Industries
There are equity securities that generally perform better than the overall market during bad times. These industries have become known as defensive industries (http://www.investopedia.com/terms/d/defensiveinvestmentstrategy.asp), or non-cyclical industries, because they refer to the defense they provide your portfolio in times when the stock market plummets. Here we are talking about the companies that reside within the industries that provide goods and services that consumers, governments and the economy as a whole will need come rain or shine.

A simple example would be household non-durables (things that get used up quickly) like toothpaste, shampoo, shaving cream, etc. Regardless of whether the economy is booming, people will still need to brush their teeth, wash their hair and shave. Despite this, there is still an element of stock selection within historically defensive industries. (For more on this topic check out Cyclical Vs. Non-Cyclical Stocks (http://www.investopedia.com/articles/00/082800.asp).)

Conclusion
As all these tips suggest, caution is the name of the game. By having your money on the sidelines or invested in bond funds, value stocks, defensive industries and, under certain circumstances, on the short side of a stock you'll be well-positioned to endure a bear market much more gracefully. Adopting strategies like dollar-cost averaging, staying realistic and avoiding panic will also help you keep your assets out of harm's way.

by Investopedia Staff (Email (http://www.investopedia.com/contact.aspx?Recipient=Webmaster&Domain=Investopedia.com&Subject=Investopedia Contact Form&ArticleID=733) | Biography (http://www.investopedia.com/contributors/default.aspx?id=79))





As it is early days, I am not sure how these so-called bargain shares (that everyboby talks about) are going to react...There is plenty of time to wait and see so I will accumulate them onto my watch list.

I am 80% cashed up and will probably be 90% at the next rally.

Lizard
15-01-2008, 07:26 AM
Thanks Hoop. Interesting post.

Being an indecisive type, I just tend to go for the soft option and some hefty re-balancing whenever things get a little murky.

It is interesting how badly the NZX appears to be responding to US problems. Though reality is that earnings were generally being capped by the high forex rates and looking around it is hard to spot likely candidates for double digit increases in eps this year. However, post year-end and somewhere around June-September the market will roll-over to focussing on the next financial year and, fingers crossed, there will be some clearer opportunities for growth emerging.

Hoop
17-01-2008, 10:42 AM
Liz,
The NZX50 has reached that mid3700 support you mentioned...wonder if it respects it?

Yes hopefully by the mid-year, a clearer picture on how the NZ stocks are weathering this US downturn....and maybe some bargains may emerge :)


Another article from marketwatch.com


PAUL B. FARRELL
14 winning strategies for a bear-market recession
Commentary: Sell stocks, realty, commodities, and buy bonds, dollar

By Paul B. Farrell (http://www.marketwatch.com/news/mailto.asp?x=80+97+117+108+66+70+97+114+114+101+10 8+108&y=Paul+B.+Farrell&z=charter.net&guid=%7Be54a9e3b-e4e6-4b2f-91a2-c82da7057ae2%7D&siteid=mktw), MarketWatch
Last update: 8:58 p.m. EST Jan. 14, 2008
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ARROYO GRANDE, Calif. (MarketWatch) -- O.K., so you're a perma-bull, a perennial optimist convinced there's always a bull market somewhere. Plus, you've got the time and the smarts to find that bull.


Warning: Stop reading now. You're going to hate what we say today. You'll hear the word "sell" a lot. Why? Because if you don't sell, a lot of you smarties will lose big bucks. Remember: In spite of all the optimistic cheering during the 30-month long 2000-2002 recession, the S&P 500 dropped 43% and investors lost $8 trillion in market cap.
But I know how much optimists hate talk of recessions and bears. That's for losers, right? Even when there's a vast consensus forming among economists, Fed watchers and Wall Street insiders. So why the denial? Because you've got a big secret: As Jack Nicholson said in "A Few Good Men," "you can't handle the truth." Behavioral finance experts have a fancy term to describe what happens: Cognitive dissonance. http://www.marketwatch.com/newsimages/news/features/stockpicks_105x79.jpg (http://www.marketwatch.com/pf/fund/default.asp)Focus on funds, ETFs (http://www.marketwatch.com/pf/fund/default.asp) http://www.marketwatch.com/newsimages/util/pixel.gif
MarketWatch offers complete coverage of mutual funds and exchange-traded funds. Highlights:
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• How to outsmart a bear market (http://www.marketwatch.com/news/story/14-winning-strategies-bear-market-recession/story.aspx?guid=%7BE54A9E3B%2DE4E6%2D4B2F%2D91A2%2 DC82DA7057AE2%7D)
• Let winning sectors ride (http://www.marketwatch.com/news/story/follow-lead-these-two-winning/story.aspx?guid=%7B48BA2CEB%2D2193%2D4B2D%2DBC57%2 D073F698383E1%7D)
• Rest easy with this portfolio (http://www.marketwatch.com/news/story/fight-recessionary-fears-diversified-portfolio/story.aspx?guid=%7B7959EED0%2D3D7F%2D4827%2DAA5C%2 D98D72DBD39E3%7D)
• Don't put your savings on the line (http://www.marketwatch.com/news/story/dont-sitting-duck-bear-eat/story.aspx?guid=%7BECF29A1E%2D5228%2D4343%2D86D1%2 DC167AA532658%7D)
• Ten investments for 2008 (http://www.marketwatch.com/news/story/ten-investing-ideas-next-12/story.aspx?guid=%7BAAFDCAFC%2DFF06%2D492F%2DBFD2%2 D022B960E93C4%7D)http://www.marketwatch.com/newsimages/util/pixel.gif Get our free Mutual Funds weekly (http://www.marketwatch.com/subscriptions/subscriptions.asp)

"People tend to ignore, reject or minimize any information that conflicts with their positive self-image," their preconceived ideas and their ideological convictions, says John Nofsinger, Washington State professor of behavioral finance, in "Investment Madness."
"The avoidance of cognitive dissonance can affect the decision-making processes in two ways. First, you can fail to make important decisions because it's too uncomfortable to contemplate the situation," Nofsinger says.
People hate conflicting data so much they get nervous when their preconceptions are threatened. Their brain freezes, they self-sabotage and do nothing--and their worst fears become a self-fulfilling prophecy.
The second way we handle conflicting information: "Your brain will filter out or reduce negative information and fixate on positive information," Nofsinger says. Unfortunately, "if you ignore negative information, how are you going to realize that an adjustment in your portfolio is necessary?" Plus, you miss lots of opportunities.
Your brain is an unreliable computer
The problem is your brain. It insists you're acting rational, even when you're making decisions based on totally irrational beliefs about money, budgeting, savings and investing. No wonder Nofsinger titled his book "Investment Madness."
Even with all our hi-tech online tools, data and programs, the optimist's brain still screws it up.
"Think of the human brain as a personal computer with a very slow processor and a memory system that is small and unreliable," says another behavioral finance guru, University of Chicago Professor Richard Thaler, in "The Winner's Curse."
"I don't know about you, but the PC I carry between my ears has more disk failures than I care to think about," he says.
Thaler warns that the "rational investor" theory is an outdated fantasy. Quoting Nobel Economist Milton Friedman: "Even though people can't make the calculations in the economic model, they act as if they could make the calculations."
Robert Shiller calls it "irrational exuberance, wishful thinking on the part of investors that blinds us to the truth of our situation." We convince ourselves we're rational, yet keep making irrational decisions. Thaler warns: "If you are prepared to do something repeatedly stupid, there are many professionals happy to take your money."
Our ego is trapped in cognitive dissonance, denying the new bear/recession, one that economists say could last until 2010 or 2011, longer than the 2000-2002 meltdown that dropped the Dow 4,436 points, from 11,722 to 7,286.
14 action strategies for stock jocks
So what's the solution? The best way to protect your portfolio, retirement nest egg and your family's assets? Last week we covered No. 14 for passive investors, the " Lazy Portfolios (http://www.marketwatch.com/News/Story/lazy-portfolios-sparkle-07-new/story.aspx?guid=%7B73F4BC3A%2DD0EF%2D4BFA%2D9698%2 D01D8DA27C91A%7D)" which are beating the S&P 500 by wide margins. See previous column. (http://www.marketwatch.com/News/Story/lazy-portfolios-sparkle-07-new/story.aspx?guid=%7B73F4BC3A%2DD0EF%2D4BFA%2D9698%2 D01D8DA27C91A%7D)
Today we'll review the 2008 forecasts from one of America's leading economists, Gary Shilling, Forbes columnist and editor of "Insight," a financial newsletter. Shilling is a contrarian who's been telling it like it is for 45 years. Back in 2004, Shilling predicted: that "subprime loans are probably the greatest financial problem facing the nation in the years ahead." Greenspan, Bernanke, Paulson and Wall Street's greedy, delusional CEOs totally missed that warning until it exploded in their faces last summer.
Every January, Shilling forecasts the upcoming year's major themes. In his latest newsletter he focuses on thirteen recommendations for stock investors facing a long bear/recession. The first five are directly linked to the subprime mortgage meltdown:

"Sell or sell short homebuilder stocks and bonds.
"If you plan to sell your home, second home or investment houses anytime soon, do so yesterday.
"Sell short subprime mortgages.
"Sell or sell short housing-related stocks.
"Sell or sell short consumer discretionary spending companies."

Like I said, you'll hear the word "sell" a lot. You'll hate it, get angry, and dismiss his advice. Why? Optimists can't handle conflicting data. Remember, as Thaler warns, if you "do something repeatedly stupid there are many professionals happy to take your money." Consider the $8 trillion in losses between 2000 and 2002.
The next five recommendations focus on the out-of-control speculation triggered by years of easy money. "Oceans of liquidity are evaporating into small puddles and the zeal for high yield is being replaced by worries over solvency," Shilling says.
"Leaping volatility in many markets is telling investors, painfully, just how far out the risk spectrum they had climbed. So the de-leveraging of the many areas of intense speculation beyond housing is at hand."
His next five strategies counter-attack this rampant speculation:
"Sell low-grade fixed-income securities." Junk is junk, so dump!
"Sell or avoid most commercial real estate." During the 1974-1979 recession, I was at Morgan Stanley helping REITs, banks and developers work-out huge problem portfolios. Today smells worse.
"Short commodities: Long run, we're bullish," Shilling says. But short-run "as global demand falters with a global recession, commodity prices will fall."
"Sell or sell short emerging market equities." If you think foreign stocks will do better than domestic, think again. "Major stock markets tend to move together, particularly on the downside." Plus, China's P/E ratios exceed 50.
"Sell emerging country bonds."Also, don't count on Fed cuts rescuing Wall Street. They'll ease the collapse for a few minutes, and then reality sets in again. The recession must run its course. So here are Shilling's final three strategies as he looks deep into America's soul at the rough days ahead:

"Sell or sell short U.S. stocks in general.
"Buy long Treasury bonds." They will "rally as the recession unfolds."
"Buy the dollar before long," Shilling says. "The buck has been weak recently because the U.S. is the first major economy to slip into recession, the Fed is the first central bank to cut rates, and the U.S. housing bubble is the first to break, all of which make America a relatively unattractive place for investment. ... The recession that we believe is now starting in the U.S. will spread globally in about six months as U.S. imports weaken and the global credit crunch curbs financial activity worldwide. Then the dollar will probably rally as it plays its usual role as a safe haven. Since markets anticipate events, the turn in the buck could be close at hand."Ride it out?
Should you sell or "ride it out?" Shilling asks rhetorically. "Many investors believe they're better off staying with their stocks, even in the face of a major bear market, because timing the market is difficult. That's fine if they stick to their plans, but far too many panic at market bottoms and sell at just the wrong time."
Finally, if your brain is still screaming, "Don't listen! Don't sell!" remember Shilling's formula: "Another reason for selling stocks in anticipation of a bear market is a matter of simple grade-school arithmetic. If you lose 50% on a position, you have to double your money to get even."
Get it? Lose 50% during a bear, you have to make 100% to recover your losses in the next bull. In short, "sitting on the sidelines" may be your best strategy in a bear market. But first, you really have to hear the word, "Sell, SELL!"

Halebop
17-01-2008, 11:47 AM
Nice article Hoop.

I think we are a little early to call this a bear market just yet (even though I too think it is). At the moment it's just a scary looking correction.

Reading the article reminded me just how much potential trouble CNP is facing. US Property markets are evil and lonely places during recessions. I was a little bemused to see Sotheby's picked this moment to buy back their building for twice their (quite recent) exit price. Based on their corporate track record, expect an art market recession to start some time this afternoon. Citicorp is also confirming my belief that they are a fair weather friend only. They seem to have an unseemly habit of getting a cold every time someone sneezes.

Deev8
17-01-2008, 04:47 PM
PAUL B. FARRELL
14 winning strategies for a bear-market recession
Commentary: Sell stocks, realty, commodities, and buy bonds, dollarThat was an interesting article by Farrell. David Dreman expressed almost the opposite point of view in one of his regular his Forbes Magazine articles last October http://www.forbes.com/personalfinance/forbes/2007/1015/106.html (free access but registration is required).

The article title "Panic No. 12" referred to the twelve major market sell-offs since the end of World War II. Dreman says:

Since coming to Wall Street in the late 1960s, I have been through seven such crises. Somehow, the market survived them and thrived. Look back even further to the period following the end of World War II, and sure enough, you'll find that pattern holding in four more market spills. Beginning with the first postwar panic, resulting from the 1948--49 Berlin blockade, stocks have tumbled only to come roaring back to new highs. The worst market break came in 1973--74, during a nasty recession and the Arab oil embargo. The most recent was the dot-com slide, which began in March 2000 and ended in late 2002. The Nasdaq Composite, heavy with tech names, still has not regained the ground lost in that crash, but the broad indexes have.

During each crisis investors felt confused, uncertain and panicky. They believed nothing in their previous experience could help them cope with the ominous new world they faced. "Sell, sell, sell," their inner worrywarts advised. "Save your capital before it's too late."

This almost always turned out to be a bad move. Selling in a crisis is foolish. Yes, if you had sold the S&P 500, say, a year into the bear market, in March 2001, you would have avoided another 28% decline before it hit bottom. But would you have had the wisdom to get back into stocks a year and a half later? I don't know of anyone advising an exit in March 2001 who also switched to a bullish stance in fall 2002. And if you had sold in March 2001, and stayed out, you would have missed an opportunity. Since then the stock market has returned 46% (including dividends). On average, for each of the dozen crises, the market was up 36% one year after the low point, 44% after two years.

Today's stock market remains solid with good fundamentals and many cheap stocks at hand. The ongoing liquidity crisis must be handled gingerly, of course. Commit your capital slowly as several more shocks must be absorbed before a broad market rally begins.

Halebop
17-01-2008, 05:42 PM
Today's stock market remains solid with good fundamentals and many cheap stocks at hand. The ongoing liquidity crisis must be handled gingerly, of course. Commit your capital slowly as several more shocks must be absorbed before a broad market rally begins. [/I]

So stay in the market but do it slowly because he's certain there are more drops to come? Well one way or the other he'll be proved right huh?

Hoop
17-01-2008, 11:06 PM
Deev It seems David Dremans strategies have touch of Buffet. Buffet sorts out stocks that will survive a downturn... have super-long uptrend lines that are always respected and then averages down in when the price drops to the point that they are classed as bargains. There seems to be many different stategies...I guess you have to find the one that works the best for you........
Interesting points of view from the opposite spectrums.

Deev8
18-01-2008, 09:05 AM
Deev It seems David Dremans strategies have touch of Buffet.Similarities aren't surprising I suppose. They were both students of Ben Graham at Columbia University, although Dreman's approach is closer to Graham's concentrating more on quantitative analysis while Buffet places more emphasis on the quality of management and identification of companies with "defensive moats" etc

Deev8
18-01-2008, 09:09 AM
So stay in the market but do it slowly because he's certain there are more drops to come? Well one way or the other he'll be proved right huh?His advice was a little less ambiguous than that - Don't feel forced to sell stocks that you are holding in a panic. Also be aware that the panic is creating some good opportunities, but commit new capital to these opportunities gradually as prices may fall further before they rise (creating more bargains).

winner69
18-01-2008, 09:31 AM
Wasn't that long when 1500 was support for the S&P500 ..... after todays nearly 3% fall 1300 is in danger .... now 15% of the highs of last October

Things sure change eh

winner69
18-01-2008, 09:53 AM
The first post I made on this thread mentioned 'secular bear markets' and that the US markets have been in one since 2000. Secular bear markets on the average have lasted for 13-14 years. Long term real returns over a secular bear market are essentially zilch ... even thought there are periods when the market can go up by more than 20% or more in any one year

The DOW today is 5.8% higher than it was in Dec 1999 / the S&P500 (a broader measure) is 9% lower than it was in Dec 1999

See what I mean about secular bear markets ..... if my hypotheseis is true and we are in the middle of a secular bear market the markets in the US (at least) in 2013 / 2014 will still be about where they are today

Hence my investing strategy remains unchanged ...... pick winners and stay with them as long as they trending up .... and even in secular (as well as ordinary) bear markets there are winners ... not everything goes down

Hoop
19-01-2008, 11:26 AM
Winner, a little more dimension from me to reinforce your secular cycles and the events included within those secular cycles.

328

Notes from my pathetic attempt in posting this chart

My chart is a 36 year time frame of the DOW from 1971 to 2008

the 1987 crash was in the 1982-2000 Secular Bull Market cycle.

Over the 36 year graph there are no broken long term uptrend lines

the scale is linear so the data are all out of perportion ... the 2000-02 crash looks bigger than the 1987 crash,which it was not true. The secular bear does not stand out with the linear graph neither. (It needs to be in Log scale)

Primary support at 12000 is very significant.

10,000 is significant as a trendline level

2 vertical lines between 1982 and 2000 show the secular bull market phase

Both 12000 and 10000 look realistically achievable in todays climate.

Secular Bull market ended in 2000 has to be replaced by Secular Bear.

Food for thought

What happens with a crash in a secular bear market phase? Does this alter the historic recovery phase after the crash event? Will the future recoveries such as intra bull market phases within the secular bear phase be shorter and stunted as was the 20003-2007 Bull?
Winner estimates 2014 as an average timeframe for the death of the secular bear...will this give us another opportunity of another intra bull market phase if so it will be short in duration. If no bull then we investors will have to manage a 7 year bear phase with short term raalies (corrections**) which is a long bear period historically averagewise.

Secular phases follow the same patterns as their shorter time frame phases counterparts......so in Bear phases follow the simple 5 down 3 up rule. (5 downturns to 3 corrections**)

** Please note: Obviously, many people deny (or not thinking) we are in a shorter term bear market phase (confirmed last week)...because....The use of the word "correction" in a bear market is a rally event ;)
Thanks Winner for reminding me that we are in a secular bear phase, it will alter my investment strategy a little (assume to 14 year phase as reference)...such as not to too excited when a bull arrives within the next 1-3 years time as it may be stunted as well. This makes following TA, with its trendlines and buy/sells signals even more important over the rest of this secular bear period.

Liz: The NZX didn't respect that mid 3700 support closing at 3664

winner69
19-01-2008, 02:33 PM
Hoop - interesting stuff

Secular cycles are generally based on valuation cycles more so then prices ...... like P/E ratios which over time do cycle from highs to lows.

Secular bear markets commence at the first down year after P/E ratio peaks and ends at the bottom of the P/E cycle (when the low is reached) ....... conversely a secular bull market runs from a low P/E to when the P/E peaks.

The secular bear market in the US from 1966 to 1981 saw P/E ratios fall from 24 to 9 .... followed by a secular bull market through to 1999 when P/E ratios reached 42 ...... and the current secular bear market then started ......... and will probably end when P/E goes below 10 (based on history) some time in the future

Another interesting thing that is counter intuitive is that the US economy usually does better during a secular bear market then during a secular bull market .... like from 1964 to 1981 the DOW went nowhere but GDP grew by 373% while during 1982 to 1999 when the DOW 1,200% GDP grew by only 196% (half of what it was during a bear market) Inflation had some bearing but taking out inflation real GDP growth was similar in both the secular bear and bull market.

It really is valuation cycles that matter .... rather than price

Looking ahead P/E in the USA is still high (esp if you account for record margins (not sustainable) and as it is turning out a lot of the financials profits were all smoke and mirrors eh ..... this is why I stick to mt long term hypothesis as to waht is going to happen over the long term and invest accordingly

Deev8
19-01-2008, 02:42 PM
Looking ahead P/E in the USA is still highThe historic P/E for the S&P 500 is 16.8, which is still high. The NZ market P/E has fallen to 14.4, but the UK FTSE 100 is on a relatively modest P/E of 10.8.

Hoop
21-01-2008, 11:13 AM
The historic P/E for the S&P 500 is 16.8, which is still high. The NZ market P/E has fallen to 14.4, but the UK FTSE 100 is on a relatively modest P/E of 10.8.

The unknown, Deev, as Winner has pointed out is that the earnings part of the P/E equation is suspect.

Email from Colin Twiggs (http://www.incrediblecharts.com/free/trading_diary/trading_diary.htm) on Saturday night confirms what we have been talking about ...as usual a great trading diary with much needed graphs and expertise.

So to the hard part....where is the market going to go in the short term?

I am hoping for a small rally (up to 6% on DOW,NZX ), whether I get what I wish for is another story. Why ? you may ask. I think and hope that 12000 support on the DOW is a massive thick floor support which will take a lot more downward pressure than what is available at the moment to break (expecting it to evenually break at a later date). There are many investors out there who are in denial that the Bull has died and with the rally it will reinforce their thinking that the correction (fall) has ended and they will enter and bargain hunt in averaging down.....with them, there will be the Bear market strategists jumping in and out for a quick buck + plus some Bear Market investor rogues who will pump and dump (http://http://www.investopedia.com/terms/p/pumpanddump.asp). So I will expect temporarily optimism and happy times.

Short term buy and sell on the volatile stocks (RAK, FBUetc) and the hardest hit utilities (CEN etc).
Telecom has fallen the least and seems to be an oasis within this downturn so this stock is an enigma in regarding a quick punt.

From TA and assuming the bear market is operating... 12800 on the DOW is the resistance point at which the market will run out of stream. Depending on any upward pressure, that is, if that pressure is weak it may not get any where near the 12800, however at the moment this 12800 is the maximum benchmark. If for some reason the indices passes 12800 and up significantly past that point (very unlikely), it would be assumed that the bear market phase was not established in the first place,a false break or some sort of artificial intervention has occurred.) On the other hand if the DOW falls quickly below the primary 12000 support mark I would then expect a crash to occur as the downward pressure must be huge

therefore DOW 12800-12100 = 700 (6% rise is the maximum)
NZX 3900-3650 = 250 (6% rise )

Not sure about the ASX factor, they are not a confirmed bear market yet so if a fall happens across the ditch and the Bear is confirmed it may drag the cross NZ/OZ stocks with it. Colin Twiggs expects the ASX to keep falling.


Problems and Dilemmas

Will the 12000 mark hold?...wont know until at least Wednesday morning (NZ time) Holiday Monday in America I think??

Will the rally be a good 6% or a wimpish one or delayed for the next few days after more falls. In theory Key support NZX at mid 3450,so possible 5.5% fall until resistance is meet..DOW support at 12000 (1% fall)

Will the NZX and ASX wander aimlessly on Monday and Tuesday or will Asia create impetus? Will know by tomorrow.

Is it not worth the risk. Get 7.5% in the bank guaranteed



So I am tempted to buy, not sure what yet....TA trend lines and buy signals will be useless as I am buying to dump on the rally.

We probably have a couple of days to think about it

NZ Shares that rally constantly to the past DOW rallies is probably what I will be looking at. FPH is not a candidate to that rule but NZ investors perceive this share as undervalued so I will be watching that as well as other "perceived" undervalued stocks ie NZO and PRC etc.


Your thoughts and suggestions.....

Hoop
21-01-2008, 12:10 PM
Hoop Quote....So I am tempted to buy, not sure what yet....TA trend lines and buy signals will be useless as I am buying to dump on the rally.

Badly worded by me .......OBV and probably other quick TA signals would not be useless but very valuable to identify the entry point.
Apologies to the TA and day traders.

AMR
21-01-2008, 01:02 PM
I'm not that keen to buy at the moment...the Dow might stall at any place below 12800 as well (most likely 12500, the intraday low during the August panic). Stocks are too gappy right now, and the prevailing trend is down. I tend to sell short right before close if it looks like the S&P futures are going to indicate a lower opening along with a bearish chart pattern and an indicator divergence is even better.

Hoop
21-01-2008, 06:55 PM
ASX primary support of 5650 is breached, now at 5631. This may confirm their bear market phase.
AMR did you have any joy shorting in Oz today? What a shocker day ASX all ords down 2.9%.

Yes as you said the prevailing trend is still down.

I feel quite chuffed today all my 3 stocks recorded gains + another day's interest from the bank :D

Disc: NZO PRC DPC

Hoop
22-01-2008, 09:03 AM
I might not be chuffed today !!!

Big losses in Europe (footsie 5578 -5.48%).
Latest news from Marketwatch (http://www.marketwatch.com/news/story/stock-futures-pointing-sharp-losses/story.aspx?guid=%7B9A894790%2D5D69%2D48C6%2D8303%2 D18EE41CA5D1C%7D)... quote..Stocks in Europe are trading over 20% below 2007 highs, which meets technical definitions of a move into a bear market. It also meets the definition of a crash (http://www.investopedia.com/terms/c/crash.asp).


Also another article from Marketwatch (http://www.marketwatch.com/) March contracts on the Dow Jones Industrial Average traded 522 points lower to 11,584 as of 11:30 a.m. Eastern.
My take on this is that 11,584 is below the big primary support of 12000 and is a bearish sign signaling worse to come.

My yesterdays quote.. So I will expect temporarily optimism and happy times. is still valid, it is the timeframe which is in doubt. I mentioned that the 12000 on the DOW will take a lot of selling pressure to breach...however with extra imformation being received all the time, the chances of a breach is now looking a lot greater than yesterday.

Areas I will be watching today on the NZX are

Volume...will there be irrational selling (fear or panic)
NZSE50 Indices drop..will the key support of 3450 hold?
Look for stock selection, the "perceived" good value stocks which have been hammered the most.

Depending on these factors I may or may not jump in. If I do, it will not be a huge buy in, as I must protect my portfolio against adverse risk.

The adverse risk is the realisation this could be what many commentators have been thinking of for the last 6 months..the meltdown or "crash" (http://www.investopedia.com/terms/c/crash.asp)
Crashes tend to install panic selling (http://http://www.investopedia.com/terms/p/panicselling.asp)and cause a further irrational sharp drop. I do not want to be in the market when this happens.

Note: Europe's plunge overnight (NZ Time) meets the definition of a crash.

Hoop
23-01-2008, 10:57 AM
Dow closed at 11971 (-1.06%)much lower intraday but recovered due to artificial stimulis by the FED dropping the interest rate by 0.75%.

The DOW is at the approx12000 support, and there is evidence of resistence appearing at this level. This support level is offerring a resprite from the meltdown.

Will the 12000 support be respected? If so we may see bargain hunters emerge and give a few weeks of bliss, (and a push towards 12800) if not and the 12000 is well and truely breached (closing time not intraday) the melt down will continue with the next target support at 11200 (another -7%). With the index at 11971 and was a lot lower earlier in the day, the chances are in favour that the 12000 support level will be breached at some point of time, and we are presently in the eye of the storm.

Bought PPP yesterday (short term) first buy for 6 weeks. Only a small purchase in relation to my portfolio.

78% cash (may increase) Have adopted the "selling in the rally" strategy.

Hoop
24-01-2008, 09:32 AM
The closing bell shows the DOW at 12270 (+2.5%)
Although the index was as low as 11700'S it has rallied back to close above 12000 primary support.
In the past the DOW activity is reflected to the other world stockmarkets, so the ASX and NZX could also see a bounce.

We are at the beginning of our first Bear Market Rally....use it wisely as it may not last long:).

Hoop
26-01-2008, 10:51 AM
In times of market transitions an investor is bombard with differing points of view based on differing criteriae....who's right and who's wrong?. ..who's information is more valid? ..is there an alterior motive...do you trust a more experienced and well known respected commentator to that of a commentator of unknown quantity/quality?

Brian Gaynors article (http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10488863) in the NZ Herald is an intersting example. Brian uses one criteria (the most common one) to base his opinion that NZX as well as the ASX DOW and S&P 500 are not in a Bear Market Phase but still a Bull Market phase with a major correction. He is correct using his definition.

This brings up the dilemnas that investors face from time to time. Bull Market phases require less skill and less discipline to succeed. A Bear Market phase is demanding to an investor as he/she must use all the knowledge learn't and apply with strict discipline to succeed.

So where are we now Bear or Bull? Brian who is well respected for his investor experience says not yet a bear..so it is hard to interprete if that means it is still a bull market with a serious correction just finished.

I, who have few creditials unfortunately think Bear and it's short for Bearware

Other respected commentators also think we (NZX not mentioned) are in a Bear Phase DOW S&P500,FTSE etc.
...so are we in a bull or bear market ? click here (http://www.investopedia.com/ask/answers/03/060203.asp).

I (for what its worth) am of the view that NZX has entered and confirmed a Bear Market phase(1):..due to the following criteriae:
...The Dow Theory NZX is in wave A click here (http://www.investopedia.com/university/Dowtheory/)
...Elliot Curve...NZX yes click here (http://en.wikipedia.org/wiki/Elliott_wave_principle)
...NZX broken its primary support of 3900 click here (http://www.incrediblecharts.com/free/trading_diary/trading_diary.htm)
...Market behavioural patterns show bear market phase characteristics click here
... Combined markets indices dropping 15-20% from their highs click here (http://www.investopedia.com/terms/b/bearmarket.asp)

At times like this it is good to get as much info as possible

where to from here ??
Well personally I beleive Colin Twiggs more so than Brian Gaynor due to more valid points mentioned and deeper analysis by Colin.

Colin Twiggs latest newsletter (http://www.incrediblecharts.com/free/trading_diary/trading_diary.htm) is good reading.

Using TA look at the key indices points NZX 3900, Dow 12800, S&P 500 1400, If we are in a bear market the above indices levels are resistence levels and will be hard to breach, therefore there is odds on chance that the breach wil not happen during this present phase.

For me I am taking the Bear option and holding a cashed up position.

Investors who are following Brian Gaynor will probably be buying up "bargains' ...so for their sakes I hope he is right and I am wrong.

Disc : bear market rally is maturing... beware of another downturn.

Hoop
28-01-2008, 12:08 PM
Interesting day on the NZX. Considering the North half of the North Island is on holiday + Australia Day in OZ, the NZX is trading at higher volume than I expected. I have taken the advantage of this volume by cashing up my DPC holding (+5% profit).....Nothing flash,but my ojective this year is to be in +ve territory, if I succeed this objective in a bear market I will probably be in the top 5% of all market investment performers. Since I have adopted my Bear Market investment strategy* (commenced 8th Nov 2007) I am just in postive territory, so I am meeting my objective...so far!!.

* My Bear Market Strategy (of which there are many) I have adopted is ..stay mostly in cash and take advantage of buying and selling within each short bear market rally. Profits are interest on cash + the opportunty of buy/sell within each rally. I have broken my rule so far by holding longer term NZO and PRC stocks...this may change as I have now applied more rigid stop/loss criteria.

This reminds me of the quote from Colin Twiggs latest newletter (http://http://www.incrediblecharts.com/free/trading_diary/trading_diary.htm) (one of the events of a bear market phase theory) "......Bear market rallies are typically steep and accompanied by large volume. High volumes warn that existing stockholders are taking the opportunity to sell down their remaining positions. Stocks are transferred from strong hands to weak, and the market is likely to fall sharply at the first setback..."

I have come across some works by Gary Shilling, this guy foresaw the recent sub-prime mess back in 2004 and was ridiculed by nearly all of his peers at the time. Gary has been there and done that and is not affraid to speak his mind publically

His last years themes

Gary Shilling’s 12 Investment Themes

1. The housing bubble has burst.
2. The Fed will ease; meanwhile, the yield curve will remain flat or inverted
3. U.S. stock prices will fall, perhaps below the 2002 lows, in the midst of a major recession
4. China will suffer a hard landing due to domestic cooling measures and U.S. recession
5. Weakness in the U.S. and China will spread globally, dragging down economies and stocks worldwide
6. Treasury bonds will rally
7. The dollar will rally, but not before the recession is global
8. Commodity prices will nosedive
9. Maybe global and chronic deflation will commence in
10. Maybe U.S. consumers will start a long-run saving spree, replacing their 25-year borrowing and spending binge
11. Maybe deflationary expectations will become widespread and robust
12. Speculative areas beyond housing may suffer in 2008.His this years themes...have to pay for that unfortunately.....see the Forbes article for more (http://http://www.newsletters.forbes.com/servlet/ControllerServlet;jsessionid=4b9cf59e4b3241c4aa30a 71f8a6358a4?Action=DisplayPage&Locale=en_US&SiteID=es_764&id=ProductDetailsPage&productID=36044900)

Now for the people who think I only focus on what I want to believe...... Here is a good definition of Cognitive dissonance from Wikipedia (http://http://en.wikipedia.org/wiki/Cognitive_dissonance)

Now I will (seem by many to be bias towards the bear again) refer cognitive dissonance towards investmenting within a bear market phase
PAUL B. FARRELL (http://http://www.marketwatch.com/news/story/14-winning-strategies-bear-market-recession/story.aspx?guid=%7BE54A9E3B%2DE4E6%2D4B2F%2D91A2%2 DC82DA7057AE2%7D)
14 winning strategies for a bear-market recession (http://http://www.marketwatch.com/news/story/14-winning-strategies-bear-market-recession/story.aspx?guid=%7BE54A9E3B%2DE4E6%2D4B2F%2D91A2%2 DC82DA7057AE2%7D)


For those who think we are still in the Bull Market phase undergoing a correction, Cognitive dissonance theory still applies it is reverse as mentioned above and relates (to the belief of many) that I in formulating my analysis, I do it by filtering out the bullish mood info and only acting on the bearish mood info. (which I try not to do ...consciously anyway).

AMR
05-02-2008, 09:59 AM
We had a bounce off the 12800 resistance last night on the Dow. Our blue chips aren't doing that well. FBU closed below $10, TEL whipsawing around $4, RYM bouncing off resistance at $1.85, the FP twins drifting sideways...

I think we might see a bit more sideways with a slight downwards movement for a couple of months yet.

As for NZO, I'm not worried at all. ;)

Hoop
05-02-2008, 10:47 AM
My quote from the 22-1-08 post ..My yesterdays quote.. So I will expect temporarily optimism and happy times. is still valid, it is the timeframe which is in doubt.

Well a fortnight ago it was all doom and gloom ..now it is guarded optimism. Goodish news has surfaced to which the meda has highlighted masking the more importantly jobless figures (up again). The good news of course brings back memories of the good times that used to be. So what has happened? Is there a rebound in the economy...from where I sit the answer is no. There is still a financial monster wrecking havoc out there and sooner or later it is going to clobber another (or the same) major financial company(s)/sector(s) and the doom machine will be back in action once again. This will no doubt end this present rally.

From a share investor point of view is there a way to predict the end of this rally? If there is I (+most others) don't know about it. However an investor adopting quick in and quick out bear market strategy can be sucessful by not being greedy and hanging around in the market for too long and abiding by some simple key points.

These Key points are (assumption is a Bear Market)
The size of the rally in progress is limited to its resistence level (high chance of respecting)***.
The length of a rally has a high chance of being of a short duration.
The rally is volatile, high volume of trades.
The rally always occurs during periods of investor relief from suffering (usually with release of some good news). (note:- At the other end of Bear market phase (3) good news is met with apathy and a rally if it happens at all is generally muted).

*** This area I am concerned with ,as with a rally that lingers on longer than normal investors start to think whether the end is in sight as they focus on the good bits and erase the bad bits. To keep every thing in perspective, some simple TA is all that is needed.If the maket indices are hovering around the resistance, don't buy in... it is a good time to sell and wait and see. If the indices breach the resistence level well and truely then times have changed and a buy signal is usually triggered if not then another downward slide usually happens.

Below are the present index levels and their resistence levels (RL).

Index....... Present ..........Major R L .........Next Impt RL

Dow ...........12635 ...............12800 ..............13000
S&P500.... ...1381................ .1400 ................1450
FTSE100... ...6026.................6000 breached....6100
Hang Seng...25035............ ...26000
Nikkei .........13860 ...............13600 breached..14700
ASX.............5922............... .6000..................6400
NZX ............3711............... .3900

For an investor (with Bear market strategy) to buy into this rally at this late level there is little to gain and much to lose. The Bear market assumption is that the indices have a high chance of respecting their major resistance levels ..so stay out.


Disc
hold NZO PRC PPP
Cash 80%

Hoop
05-02-2008, 11:19 AM
We had a bounce off the 12800 resistance last night on the Dow. Our blue chips aren't doing that well. FBU closed below $10, TEL whipsawing around $4, RYM bouncing off resistance at $1.85, the FP twins drifting sideways...

I think we might see a bit more sideways with a slight downwards movement for a couple of months yet.

As for NZO, I'm not worried at all. ;)

Impossible to accurately predict the future AMR, as there are heaps of unknowns out there, including some unknowns that are not yet created.

All we have is "present" data (aging by the day and hence becoming less reliable by the day) and history.
I have "" present because by the time it is presented it could be out of date and useless. A good example of this is the IMF report recently made public, the data was coallorated at during Oct 2007 the Fed policy was dramatically altered when they found out that IMF was dated and the later figures showed a big decline in the USA economy during Nov/Dec resulting in the emergency interest rate cuts.

As for NZO (which I have too) ....keep an eye on the oil price chart.

AMR being an TA person watch out for the $87 primary support level, the price at the moment seem to want to test this level...if it is breached (not considered likely yet) the Oil market will enter a Bear Market phase (no doubt followed with all the Bear market characteristic signs seen at the moment with shares).

Hoop
06-02-2008, 09:07 AM
Quote.....Looking forward, though, there is a lot of bearish sentiment out there. Edward Meir, of MF Global wrote that, “the weakness we are seeing in the U.S. is now spreading elsewhere, rendering the notion that the world's economies can somehow decouple from the U.S. as largely misguided.”

The latest data suggest that global economies are moving largely in sync, with both Europe and Japan noticeably slowing, and even market-mover China's growth for 2008 projected by many to be below last year's levels.
Source: Casey's Daily Resource (http://http://caseyresearch.com/displayDrp.php?e=true#energy)

This international sync has been noticeable for some time within the share markets.
This reinforces my view that we can still gauge the lead from the DOW to anticipate what happens to our markets down under for the time being.

At the moment DOW down nearly 3% at 12265 nearly closing bell time.

peat
08-02-2008, 05:47 PM
From Elliotwave.com

http://www.elliottwave.com/images/marketwatch/Service%20industry%202-6.gif

Halebop
11-02-2008, 08:39 PM
Interesting to see that the big dip signalled the end of the recession not the start.

People like to say the share markets are forward looking, pricing in future performance. Suspect they instead price in future manic/depressive behaviours rather than performance "I know prices are crazy but they'll be even crazier tomorrow" (Now I sound like a real estate agent).

Sharemarkets are a lagging indicator of expectations as much as a future indicator of earnings. By the time the last swinging optimist has sunk into depression and sold into a diminished pool of contrarian risk equity (Less Cash / Same Number of Shares = :eek:), prospects have already improved.

Still, markets wouldn't be quite so profitable if this didn't occur...

peat
11-02-2008, 09:52 PM
but that isnt a graph of the stockmarket and I would expect that statistic (ISM) to be lagging somewhat as its an 'after the event' number , but, personally I dont see stockmarkets as lagging, to me stockmarkets are predictive.
Halebop by the time that last optimist has dejectedley sold out the market would have been in an accumulation phase

Hoop
12-02-2008, 11:41 AM
but that isnt a graph of the stockmarket and I would expect that statistic (ISM) to be lagging somewhat as its an 'after the event' number , but, personally I dont see stockmarkets as lagging, to me stockmarkets are predictive.
Halebop by the time that last optimist has dejectedley sold out the market would have been in an accumulation phase

Peat, I agree with Halebop...sorry.
The stockmarket is just an indicator of Human investors behaviouring together as a herd, yes you have some individualists or splinter groups but these are all averaged out during the overall days trading. In times of relative calm and rational market behaviour (especially during the middle of a bull market phase) the herd are usually nearly all of similar minds and predictions are made with a good degree of certainty and there is minimal to no lag and a degree of predictibility...but at the end of market phases the herd is divided which way to go due to conflicting information, and uncertainity leads to illogical / maniac behaviour, which due to the herds indecisive measures causes the market to lag real events, hence the term "in denial".
We are witnessing history at this very moment with a phase change from Bull to Bear, and with it comes the optimistic lag from the much more dire real events.

This brings up a point of interest....because there is always a more prominent lag at the phase change, it makes good investor sense to stay out of the Bear market phase until such time as the real events show improvement and then work away with FA to indentify good companies (the ones that have weathered the downturn well) with view to buy...OK you can never time the tops and bottoms but buying in at near bottom must be better than holding stocks during a bear market phase using the crazy excuse that you are a long term investor.

There is ample to buy in as there is that lag. The stampede buying frenzy if it happens comes in after the lag.

Admittedly a long term investor wins out by not selling in a brief bear market phase, but it is a gamble.

A more lengthy bear phase can be damaging to a long term investor, the chief damage resulting from an unforeseen "blue chip" company being perminently disabled or at best suffer long term harm from economic hard times which forces unforeseen rapid change to which that blue chip company is incapable of adapting to its new environment quick enough, telecom NZ from the dot. com crash 2000 springs to mind.


From my personal experiences.... I've had the best successes buying in when everyone tells you you are a bloody idiot buying into such a terrible market.
The time I 've had my worst investments has been buying in when everyone tells you should because they are such great bargains...This is an act of "in denial" from both ends of the market phases as far as I am concerned.

PS
Peat your chart..very interesting...I think it is that silly official recession tag of having to have at least the latest 2 quarters in negative growth before it is called a recession.
If that is true then your shaded area (end of 2002) ends when the chart just pokes it nose above the 50 line hence marking the official end...even though it is a slight negative the quarter following. To everyone outside officialdom I would presume would still be feeling like it was a continuation of that current "recession" > I don't think it is a lag event

Hoop
12-02-2008, 12:48 PM
I think we are hitting the mid stage of a bear market (Denial, Concern, Capitulation). The small caps have already taken big hits, as have the non-performers in the big cap sector. Now we are on to the rerating of the market outperformers (WOW, DJS as examples). Capitulation cant be too far behind :-)

If you are still holding any speculative stocks, or anything with a P/E over the market average, then get rid of them. Buy some of the smaller stocks on P/Es of 4-5 with good dividend yields, then sit back and wait to get back into the big cap sector.

Agree I also think we are passed the early stage of Denial and reaching concern (wave B)

Capitulation...the dreaded wave c we have still to look forward to, just how bad this event will be will define the species of this present bear market whether it's a mild loving teddy or a more dangerous grizzly ;)

Mick100
17-02-2008, 11:58 AM
there's going to some grumpy, sore headed bears around by the end of this year

Mick100
17-02-2008, 12:00 PM
One of my favourite analysts Dr Copper seems to think so





http://www.gold-eagle.com/editorials_08/images/milhouse021208c.gif

Hoop
17-02-2008, 03:55 PM
Hi Mick

This downturn is a rather strange one, as you point out metals are having good run, not only copper but even steel. This leads one to believe that industry is robust and the demand is strong which makes one question "what recession". Some comentators from very high up places (the fed) indicate that an US recession will not eventuate, others such as equity markets see signals which alway occur just before a recession starts...so who's right?
Well we as investors are experiencing the same questions being asked and same answers being given "is the stockmarket in a bear market phase or not?"
One more thing which complicates matters is the fact that the sharemarket normally downturns to a bear before a recession is confirmed...so at moment there are two camps correction/no recession...bear/recession.

I for what its worth is in the bear/recession camp.
I will outline my reasons when I get time to research thoroughly before posting. At the moment investors should proceed with caution
due to uncertainty.

My economic lecturer back in 1979 said that regulation of markets cuts off the supply of market communication and signals. This was very evident back then under Muldoonism. Today I can can understand these US commentators being polarised as to where this US economy is heading using the same comment as my economic lecturer, confusing signals are transmitted due to the bubble management economic theory. Having confused signals is in iself a warning sign that things may go pop in the middle of the night.

Back to present day the big question is who do you believe...which camp is right is there a middle ground where the fence sitters have a bob eachway and predict a very short shallow recession followed by a resumsion of growth. Who knows??

One thing for sure (via study) is that analysts never get it totalty right, they are too pessimistic in the upturns and too optimistic in the downturns.

Also history is important as many signals appear time after time in the same order before an event happens.

All this + market theory(Dow etc) should be no 1 priority before reading any present today stuff.

Another activity I have been doing is looking back a couple of years and reading research papers from various writers... to see if they were right or wrong. I have mention some of these writers in my earlier posts on this thread.

Today I have read an article written by Chris Ciovacco (http://www.ciovaccocapital.com/sys-tmpl/investingeconomicslowdown/) please when you read this article remember it was written 17 months ago on 17th September 2006.....before the housing market/sub prime mess and at a time when the sharemarkets/property markets where in full Bull market mode.
A couple of comments from Chris' article back then......History tells us that the probability of the Federal Reserve being able to engineer a soft landing in the housing market is very low.
......Once the Internet bubble started to burst, the Federal Reserve tried to engineer a soft landing by cutting interest rates 11 times in just 12 months, moves which are still without precedent today. Despite this aggressive action, we all know that the proverbial soft landing did not occur in the Internet space.
....During the last 16 interest rate cycles, there has been a grand total of one soft landing (see 1994). Using this one historical fact, there is a 6.25% (1/16th) probability that we get a soft landing.
...."The total value of residential property in developed countries has increased from $40 trillion to $70 trillion over the past five years (8.2000 to 8.2005), which (as The Economist points out) represents a larger potential bubble in terms of equivalent gross domestic product than either of the stock market bubbles of 2000 or 1929.”

Warning OK Whats going to happen this week or next? TA is showing an ending to this present rally. It could go into a resumption of a more bullish phase or a much better chance that the DOW will test and fail to respect the 12000 support line this may result in at least a 7% loss back to the target index level of 11200 {12000 - (12800-12000)} .If this happens it will be a second phase of the bear market and this phase sometimes does not recognise target indexing and it therefore possible it may fall below 11200.
The globial markets are still in sync.

Hoop
17-02-2008, 04:37 PM
Part of Winner69 post (the first post on this thread)

Winner69 has a strategy:

Since 2000 the underlying hypothesis about long term market conditions that drives my investment habits have been

The US market commenced a secular bear market period in 2000. This followed a secular bull market that run from 1982-1999
In a secular bear market long term returns are essentially zilch, even though there can be periods when the market can go up more than 20% in any one year.
Secular bear or bull markets have in the past averaged 13-14 years
By implication the NZ market is tied to these long term trendsNote:
Term secular means long term more than 10 years.
Assumption
Inference (1) ... the present US secular Bear market should in all probability end in 2014 give or take an year or two.
Inference (2) ..... that the DOW index should be 14000 or less in the year 2014
Inference (3) Long term investing may not be profitable for the next 6 years (unless you better the market each year for the next six years). This will take skill, not luck.
Inference (4) if we are presently in an average length Bear Market (12 -15 months) we may have time for another Bull + bear after that before the market enters a secular bull market phase.
Inference (5) as the secular bear market must end before a bull phase starts (obvious) it can only be a bear market or a depressed flat market in say 2013-14. Therefore if this is a bear market and it lasts for longer than the average this shortens the period of the next Bull phase or lengthens the period of the secular bear passed 2014.

For people who think that this will not happen because of increasing growth in the E part of PE Ratios should read latest Winners Posts or click onto this link

Valuations In U.S. Remain A Concern For The Long-Term Investor: (http://ciovaccocapital.com/sys-tmpl/outlookforstocks/)

Quote from the article ...Misconception: Many think that as long as corporate earnings are increasing that stocks will go up right along with them. History paints a much different picture...........

This paints a picture that a bear market phase within the middle of a secular bear market phase may not bode well for a long term investor using the "hold good stocks... bear market strategy" as it may be a long time between drinks.

One can easily see that the above strategy would work OK in a bear market within a secular bull market as the index bounces back in a short matter of time e.g 1987 crash + following bear market.........but a bear in bear???

Mick100
17-02-2008, 04:48 PM
this is a copy of a post I made on the first page of this thread - it is as true today as when it was written

I believe we have been in a secular bear market, in general stocks, for the past six yrs as winner has stated.
But if you dig a bit deeper you will find that commodities are negitively corellated to general stocks. When general stocks go into long term bear markets (15-20 yrs) commodities go into long term bull markets - Have a look at charts of the CRB index and the DOW from the late 60s to 1981. this pattern has repeated itself over and over for the last 200 yrs.

Look at a chart of the CRB index since 2001
Look at a chart of crude oil since 2001
Look at a gold chart since 2001
Look at any of the base metal charts since 2001
Then have a look at a chart of the s&p 500

Commodities are going up, general stocks are going sideways

winner69
17-02-2008, 06:37 PM
this is a copy of a post I made on the first page of this thread - it is as true today as when it was written

I believe we have been in a secular bear market, in general stocks, for the past six yrs as winner has stated.
But if you dig a bit deeper you will find that commodities are negitively corellated to general stocks. When general stocks go into long term bear markets (15-20 yrs) commodities go into long term bull markets - Have a look at charts of the CRB index and the DOW from the late 60s to 1981. this pattern has repeated itself over and over for the last 200 yrs.

Look at a chart of the CRB index since 2001
Look at a chart of crude oil since 2001
Look at a gold chart since 2001
Look at any of the base metal charts since 2001
Then have a look at a chart of the s&p 500

Commodities are going up, general stocks are going sideways

Correct Mick100 and no doubt you have been well rewarded of your support for commodities over the last few years

One other piece of support for this observation is that (in the US anyway) economic growth during secular bear markets is often greater than during secular bull markets.

What a lot of people don't get is that bear markets are not always earnings related ... bear markets are a result of declining valuation multiples ..... you can have good earnings growth but declining share prices.

Interesting stuff eh Mick100 --- but like you I have my hypothesis and invest accordingly and will do so until proven otherwise

Good to hear your views, they all help to make the big picture a little clearer

Hoop
20-02-2008, 10:46 AM
A lot of good feeling in the stock market place at the moment isn't it with stocks rising. Feel like you should be in on some of the action?

At risk of sounding a pessimist.

1 We are experiencing a rally in a bear market
2 The rally is due to end as early as this week (http://www.marketwatch.com/news/story/retest-january-lows-may-fail/story.aspx?guid=%7B3ADBB48D%2D668B%2D4D89%2DB678%2 DD5A090B3793C%7D&dist=TNMostRead)
3 Another decline is forecast by Colin Twiggs (http://www.incrediblecharts.com/free/trading_diary_archives/2008-02-16.htm) -9% target on Wall St. Larger than -9% target declines for the FTSE and ASX
4 Media is full of good news....where is the bad news? The bad news is out there but is not in the media spotlight at the moment. Expect bad news to become headlines again in the near future.
5 Available money on credit to the ordinary USA people is drying up fast, this will affect spending. This will also affect share prices as shinking available money forces investors to seek "better opportunity" stocks or other financial instruments, hence lowering PE Ratio values.
6 Is this rally on the NZX as good as you think? Look at the chart below.

This latest rally seen on the chart is nearly non-existent so it has been a very poor bear market rally so far.
It is only the pure traditionalists who thinks this not a bear market now (via definition of what is a Bear Market (http://www.investopedia.com/terms/b/bearmarket.asp))

There is no reason to be optimist at the moment ...the chart tells the story better than any other media can.

Warning: A better than average chance of a sharp global market downturn in the short term.

Disc: Cashed up some more of my remaining shares. PPP gone for a 3.5% overall profit (bought 22 Jan 08) Lowered NZO holding. Kept all my PRC.

I am battening down the hatches...they are forecasting another storm is fast approaching.

Disc: Cash 90% stocks 10%

Hoop
04-03-2008, 10:55 AM
We can easy be swayed in thinking that the worst is over when people and the media feel optimistic especially when good results appear, and the overall state of the markets are briefly forgotten about.

So just where are we at the moment in this bear market (within the broader secular bear market phase) ?

It seems the world is still following the USA market trend the worlds biggest economy so the DOW index is still very important as an indicator for NZ and OZ, until we decouple no sign of this.

So ignoring all the short term info and disinfo from the media, where is the DOW placed within this latest bear market phase. How long is this bear going to last? How grizzly is this bear going to be?

It is impossible to answer questions about the future accurately but by using history as a guide, one can use historic inferences to get a rough estimate of an possible outcome, which would be (a better than 50 /50) a better guess result.

Having a look at this simple spreadsheet from Crestmont Research (http://www.crestmontresearch.com/pdfs/Stock%20Secular%20Chart.pdf)gives an insight on the DOW's past with secular bulls and bears markets going back to 1901 and the each year result + PE ratios for each year + inflation figures.

Click on the above link to bring up the spread sheet and note the following:-

During Secular bear markets highP/E figures fall to single figures

Secular bears can be short or long in duration

No real increases and most likely a decrease in the overall index in the secular bear phase (appreciations happens in the secular bull phase).

Yearly index appreciations in secular bull phases are not as big as you would assume. the biggest increase happened in a bear phase The longer the bull the less large yearly index appreciations. Short period bulls have larger index appreciations

P/E ratios increase in secular Bull phases and decrease in Secular Bear phases.

Inflation (CPI) seems to be higher in a secular bear phase (not always) and when a high CPI number is recorded in one year within the bull phase it is usually a down year for the DOW index (not always)

Note that an yearly index can be +ve or -ve in both secular bull or bear phases. Some can be spectacular +82% in 1915 within a secular bear phase.

Can we use this spreadsheet to give us an idea to forecast into the future?

Yes I think we can (Note my opinion only) with better than a 50% - 50% chance of being right.

Using the inferences from this spreadsheet, I deduct that this Secular Bear phase is going to be long (12+ years), possibly 16+ years... so at least to the year 2012 anyway.

Reasons from spreadsheet inferences
Note that all long secular bears have near equal number of +ve years to -ve years while short Secular Bears have very few or no +ve years. This latest secular bear since 2000 has had 4 of each which gives us a foot print that this is going to be a long phase secular bear .

Secular bears that die young* are nasty beasts similarly Secular bulls that die young* are extreme in the opposite direction very feisty beasts. (*young = 4 to 5 years old)

Referring to the P/E Ratios (E being in question with a possible recession) they are presently high and chances are that the secular bear will not end until the P/E ratio falls to below 10 (2007 PE 27 [27 seems high? ..hoop] ).

P/E ratios fall very slowly in a secular bear phase (exception 1929 - 1932 [the big depression knocked PE down rapidly and killed the bear prematurely] )

So the deduction (inferences from the spreadsheet) is that if my forecast is wrong and the secular bear ends prematurely ( under 10 years ) year 2010 it will be because of a short sharp economic damaging depression, or due to an eminent sudden damaging physical collapse (catastrophe) of some other description.

On the brighter side a long secular bear phase normally have mild depreciating years and it is unusual to have more than 2 years of -ve values in a row. So if 2008 is -ve the year 2010 is odds on to be +ve

Click onto the link (http://www.crestmontresearch.com/pdfs/Stock%20Secular%20Chart.pdf) if you haven't already and look at the figures. It's very easy to follow and it is highly informative..a must look see in my opinion
I have only mentioned a few key points in this post, but looking at those historic figures many other inferences can be deduced.

Have a go and post what other inferences you make out of this spreadsheet

winner69
05-03-2008, 06:02 AM
Great post Hoop

That crestmont site has some fascinating stuff doesn't it and confirms what some think in that long term returns from equities (at least in the US and no doubt across the world) are not going to be too flash

Again stock selection is the key (a lot of stocks do go up in bear markets) with a close eye on the charts is the key over the next few years to make money

Lizard
05-03-2008, 07:49 AM
When collated in the same way, would NZX appear to be in a secular bull market?

Financially dependant
05-03-2008, 07:58 AM
Thanks Hoop, very interesting.

winner69
08-03-2008, 09:20 AM
Hoop - a close well below 12000 for the DOW probably doesn't surprise you ...... but not a good sign is it

Hoop
10-03-2008, 10:11 PM
Below are the present index levels and their resistance levels (RL).

Index....... Present ..........Major R L .........Next Impt RL

Dow ...........12635 ...............12800 ..............13000
S&P500.... ...1381................ .1400 ................1450
FTSE100... ...6026.................6000 breached....6100
Hang Seng...25035............ ...26000
Nikkei .........13860 ...............13600 breached..14700
ASX.............5922............... .6000..................6400
NZX ............3711............... .3900

For an investor (with Bear market strategy) to buy into this rally at this late level there is little to gain and much to lose. The Bear market assumption is that the indices have a high chance of respecting their major resistance levels ..so stay out.


Hi Winner
yes no surprise that the major markets around the world are breaking through their support levels, it was predicted to happen but the timing is hard to figure (see #96 .. 20th Feb)

As most have broken though the support levels (SL) this suggests a high chance that another downturn is in progress. Just how big the fall is guess work at the moment but TA does give some indication, it may be about 8% fall for the USA and Japan and 13% for Australia (see figures below)

I included the above quote box to show just how much has changed since the 5th of February. A month ago the indices were bullish and were testing to breach their resistance levels ...but now those old resistance levels seem along way a way with new resistance levels [RL] (old broken support levels[SL] ) forming below them when support levels are broken.

Index..... 5th Feb ..7th Mar...RL......... SL...........Next target SL

Dow ...........12635 ..11894....12000.......................11200 -7%
S&P500.... ...1381......1293.....1300........................ 1200 -8%
FTSE100... ...6026.....5700.....6000.....5500 (has not broken support)
Hang Seng...25035....22501...26000....22000 (has not broken support)
Nikkei .........13860 ...12783...13000.......................12000 -8%
ASX.............5922......5369.....5600........... .............4800 -13.5%
NZX ............3711..... 3559.....3940.....3540* (has not broken support)

* new target SL of 3540 set at beginning of Jan2008 when NZX broke the primary SL of 3940

Above figures are rounded for simplicity.

The NZX drop of 11 points today still has it above its support level(SL) but only just. If this support level of 3540 is broken, the new target SL is 3540 - (3940 - 3540) = 3140 (12.5% decline) With the countries all around us especially Australia breaking support, it looks grim that the NZX will probably follow suit.

Although these SL targets are theoretical at best it looks as if NZ and Australia are going to be worse off (% fall) this time around than USA/Asia. (NOTE:- this is only relevant if the indices test those targeted SL in the future of course, they may or may not, but there is a good chance they may considering this is a bear market). There is a good chance a rally (up to the RL) may appear before the targeted SL are tested

Mick100
13-03-2008, 11:47 PM
my most trusted analyst, Dr Copper, has declared the bear market finished. There was/is no bear market and no recession - in fact dr Copper is predicting strong economic growth over the next 12 months at least

http://www.gold-eagle.com/editorials_08/images/martens031108f.jpg

Hoop
14-03-2008, 09:39 AM
Nice info Mick

It seems that commodity investment is still one of the places to have your money at the moment.

Mick..congratulations on your astute investing in tough times, it seems you are doing exceptionally well. Keep it up...it's great to hear success stories and people willing to share that with others. I hope other investors have picked up your strategy early and are in enjoying this commodities boom.

To me this is more evidence to confirm that stocks and the sharemarkets are in a bear market phase, as stocks v commodities are countercyclic in nature.

Winner briefly pointed this out in post #95.

A larger explanation is below

Quote article from Market Oracle (http://www.marketoracle.co.uk/Article3516.html)

How To Invest During Economic Downturns: Commodities versus Stocks

Commodities (http://www.marketoracle.co.uk/Topic3.html) / Learning to Invest (http://www.marketoracle.co.uk/Category89-All.html) Jan 28, 2008 - 02:54 PM
By: Mary_Rivas

http://www.marketoracle.co.uk/images/topics/commodities.gif (http://www.marketoracle.co.uk/Topic3.html)
In an article published yesterday (January 23, 2008) in the Financial Times , George Soros stated that a recession in the U.S. is now more or less inevitable. He noted that China , India and some of the oil-producing countries however are in a very strong countertrend. Soros went on to explain that “the current financial crisis is less likely to cause a global recession than a radical realignment of the global economy, with a relative decline of the U.S. and the rise of China and other countries in the developing world. “





A growing number of economists, money managers and analysts have begun issuing warnings that a recession may be hard to avoid in 2008. On top of that, recent data is indicating an increase in inflation that is being fueled by higher prices for commodities such as oil, wheat and corn.
Given the growing concerns of the future of the economy, I thought it would be very helpful to provide readers with some history on how commodities and stocks have performed over various economic cycles.
Performance of Commodities vs. Stocks
To understand how commodities and stocks perform during economic downturns, let's look at past trends.
In a revolutionary study from the Yale School of Management's Center for International Finance entitled Facts and Fantasies About Commodity Futures, research revealed very important differences in how commodities and stocks perform over time. The research team analyzed how commodity investments performed compared to stocks and bonds over the last half century .
Below are some key highlights of the research findings over various investment horizons:
• Stocks and bonds are negatively correlated with inflation . In other words, as inflation increases, stocks and bonds tend to move in the opposite direction. Commodities futures, in contrast, are positively correlated with inflation. When inflation rises, commodity futures tend to rise as well.
• Commodity prices can rise even during economic downturns. Commodities can serve as a hedge against stock market and economic risk.
• Commodities and stocks have a negative correlation . In other words, commodities and stock perform tend to perform oppositely over time. When stocks go down, commodities, over time, tend to move up and vice versa. Thus, a portfolio invested in stocks and commodities, is likely to experience less volatility than a portfolio that is comprised of only stocks.
• From 1959 to 2004, commodities futures produced comparable annual returns to stocks and greatly outperformed bonds.
• Commodities have had less risk than stocks over time. The volatility (i.e., fluctuations in portfolio returns) of the returns of commodities futures over a 43-year period was less than the volatility of the S&P 500 index over the same period.
While no one can be certain if the looming recession will be global or more or less confined to the developed world, one thing is clear: ignoring commodities in a declining stock market is irrational.
Every investor can benefit by learning how to diversify beyond stocks and bonds. A properly diversified portfolio that includes commodities can enhance return and reduce risk. To learn more, visit www.powerpathtomoney.com (http://www.powerpathtomoney.com/).
In a recent interview with Bloomberg ( January 7, 2008 ), Jim Rogers , known by many as the world's expert on commodities investing, reaffirmed his positive outlook on commodities. He stated that ``All commodities are going to be in much shorter supply for another decade.'' Rogers indicated that in the event of a global recession, agricultural commodities may be the best investment among commodities.
The findings of the Yale study and others have triggered huge changes in the financial industry---many which affect you. Investment companies are increasingly creating new investment vehicles to enable individual investors to participate in commodity investing. Today there are easily accessible ways for you to invest in commodities and to find which investment vehicle is right for you. Anyone can now invest in commodities in low-cost and easy ways that were not available during the last commodity bull market.
By Mary Rivas
Mary Rivas has over 16 years of experience working in the investment management industry, and is the author of Power Path To Money, which is available at www.powerpathtomoney.com (http://www.powerpathtomoney.com/). She wrote this book to teach people 1) how to use low cost ways to easily invest in commodities and 2) how to invest in themselves to achieve maximum success. Her book reflects her philosophy that successful investing is achieved by being knowledgeable about investment opportunities and by developing one's inner power.

Mary Rivas Archive (http://www.marketoracle.co.uk/UserInfo-Mary_Rivas.html)

Hoop
18-03-2008, 09:50 PM
Hi Winner
yes no surprise that the major markets around the world are breaking through their support levels, it was predicted to happen but the timing is hard to figure (see #96 .. 20th Feb)

As most have broken though the support levels (SL) this suggests a high chance that another downturn is in progress. Just how big the fall is guess work at the moment but TA does give some indication, it may be about 8% fall for the USA and Japan and 13% for Australia (see figures below)

I included the above quote box to show just how much has changed since the 5th of February. A month ago the indices were bullish and were testing to breach their resistance levels ...but now those old resistance levels seem along way a way with new resistance levels [RL] (old broken support levels[SL] ) forming below them when support levels are broken.

Index..... 5th Feb ..7th Mar...RL......... SL...........Next target SL

Dow ...........12635 ..11894....12000.......................11200 -7%
S&P500.... ...1381......1293.....1300........................ 1200 -8%
FTSE100... ...6026.....5700.....6000.....5500 (has not broken support)
Hang Seng...25035....22501...26000....22000 (has not broken support)
Nikkei .........13860 ...12783...13000.......................12000 -8%
ASX.............5922......5369.....5600........... .............4800 -13.5%
NZX ............3711..... 3559.....3940.....3540* (has not broken support)

* new target SL of 3540 set at beginning of Jan2008 when NZX broke the primary SL of 3940

Above figures are rounded for simplicity.

The NZX drop of 11 points today still has it above its support level(SL) but only just. If this support level of 3540 is broken, the new target SL is 3540 - (3940 - 3540) = 3140 (12.5% decline) With the countries all around us especially Australia breaking support, it looks grim that the NZX will probably follow suit.

Although these SL targets are theoretical at best it looks as if NZ and Australia are going to be worse off (% fall) this time around than USA/Asia. (NOTE:- this is only relevant if the indices test those targeted SL in the future of course, they may or may not, but there is a good chance they may considering this is a bear market). There is a good chance a rally (up to the RL) may appear before the targeted SL are tested

Update:
Looking at TA the markets are down trending
Ftse has broken 5500 support, also Hang Seng and the NZX...now all the above markets have broken their supports.
Deduction: All above markets are coupled, and no sign of decoupling is evident.
The Dow S&P Hang Seng attempted to break back above their old support (which is now a resistance) and so far have failed, thus reinforcing the resistence level

Note that the Nikkei has fallen through it's target support level (12000) without any hesitancy and has not recovered back above it with today's rise, if the markets are coupled (which they seem to be) this could be a very bad signal of an extended downturn (severe) emerging. This signal however may be false if the Nikkei target support level is regained and manages to stay above or around 12000 for a period of time.

It is amazing really (if true) that the first signals show up in Japan and not Wall St.

Warning!

Hoop
06-04-2008, 09:57 PM
The key indices supports, threatened to break 2 weeks ago in most exchanges held, Nikkei had a false break.

Some commentators say the worst is over....is it?
Strange talk especially when money is still evaporating even as we speak. The FED is feeding a financial black hole with borrowed money, and cracks are appearing within the FED's own departments as whether this was a smart or a dumb idea. So Benji (Bernanke) could a hero or a zero, only time will tell.

For us investors, the question appears.."Is this a bull recovery from a short lived bear ...or a rally within the bear market?

DOW 12800.. NZX50 3900.. S&P500 1400.. FTSE100 6000.. HangSeng 26000.. ASX 6000.. Nikkei225 15000..

All of the above indices figures are primary resistance levels, if these levels are breached the bear is dying (but not necessarily dead!!!). Could be a genuine recovery or it could be a setting of a higher resistance level and a classic but destructive bull trap.

Respect of these indices resistance levels indicate that we were experiencing a typical bear market rally.

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Bear market rallies only delay day of reckoning


By Ambrose Evans-Pritchard, International Business Editor

Last Updated: 12:13am BST 02/04/2008



Every slump is punctuated by exuberant bursts of optimism, known to traders as "bear market rallies". Japan had four false dawns during its long slide into the abyss. Each lifted Tokyo's Nikkei index by an average of 53pc. Such bounces can be intoxicating.

The financial crisis in full (http://www.telegraph.co.uk/money/main.jhtml?menuId=242&menuItemId=10359&view=HEADLINESUMMARY&grid=F7&targetRule=14)
Read more of Ambrose Evans-Pritchard (http://www.telegraph.co.uk/money/main.jhtml;?menuId=242&menuItemId=10299&view=COLUMNIST&grid=F7&targetRule=14) Teun Draaisma, Morgan Stanley's stock guru, expects the current rally to boost Europe's MSCI 600 index by 21pc from its trough in late January, with similar moves on the S&P 500. The battered shares do best: builders and banks this time.

There have been nine bear rallies since 1970. The average length is four months. The surge misleads investors into believing that sunlit uplands lie ahead. Then the sucker punch hits.

"The Federal Reserve's actions have averted financial Armageddon, but they cannot avert an earnings recession. We don't expect a new bull market until early 2009," he said.
Morgan Stanley says earnings will fall 16pc this year as debt leverage kicks into reverse.
Investor psychology is "asymmetric". The market discounts trouble in advance. Share prices start falling a year before earnings peak. In a downturn investors keep selling until earnings hit bottom.
"Bear markets are terrible for the human psyche. You get one profit warning after another. People see their hopes dashed so many times that they stop believing," said Mr Draaisma.
"You have got to be very disciplined and not buy shares too early just because they look cheap. Things can go down further than you ever dare believe," he said. He is not predicting a bloodbath along the lines of 1929-1933 (-88pc) or 2001-2003 (-49pc): just a long slog, with failed rallies.
For now, the markets are flashing a tactical buy signal. Mr Draaisma's "capitulation indicator" has crashed to the lowest level since the 1998 LTCM crisis: the share "valuation indicator" is near an all-time low.
UBS is also gearing for a big rebound, convinced that the Fed's move to shoulder $30bn of Bear Stearns liabilities has changed the game.

In its latest report -"Ready for a Rally" - it said financial shares rose 448pc in the 12 months after the Swedish rescue in 1992, 88pc after Japan's Revitalisation Law in 1998; and 82pc after Roosevelt's Emergency Banking Act in 1933.
The pessimists at Société Générale remain sceptical, even though the Fed has gone nuclear. "We expect global equity prices to fall by up to 75pc from their peaks as a deep global economic downturn unfolds over the next few years," said Albert Edwards, their global strategist. He fears a 50pc collapse in earnings, compounded by an "Ice Age derating of equities".
It may echo the Lost Decade in Japan, where stocks fell 80pc. The yields on state bonds kept falling as debt deflation engulfed the banks, thwarting efforts to nurse lenders back to health by the usual device: "steepening yield curve". The authorities were left chasing their own tails. Having lived through this, Japan's chief regulator Yoshimi Watanabe has advised Washington to go for a quick taxpayer rescue, rather than trying "to fix the hole in the bathtub".

Whatever happens, there will always be tactical rallies. Mr Edwards cites four Wall Street bounces above 25pc in the 2001-2003 bust. The buying cue is when investor gloom nears black despair. The put/call ratio on options is now at a bearish extreme of 0.90.
"That would historically suggest that a joyous 25pc spring rally is close at hand," he said. Yet Mr Edwards remains wary as long as analysts cling to their belief that earnings will rise 11pc in 2008. This is not the sort of "washout" level of gloom required to clear the air.

Still, the oldest adage on Wall Street is "never fight the Fed". In short order, Ben Bernanke has slashed interest rates by 300 basis points to 2.25pc, and invoked the emergency clauses of Article 13 (3) of the Federal Reserve Act for the first time since the Great Depression to take on direct credit risk.
The Bush administration has told the housing agencies Fannie Mae and Freddie Mac to absorb $200bn of extra mortgage debt. It has implicitly nationalised them in the process. The network of Federal Home Loan Banks has mopped up $900bn of mortgage securities. Congress has rushed through a $170bn fiscal blitz.
This is not to be sniffed at. It is worth a good spring rally, until the inexorable logic of a 25pc house price crash prevails once again.
Bernard Connolly at Banque AIG, who foresaw this crisis with uncanny accuracy, believes central banks will resort to full-throttle reflation, setting off a fresh boom in shares and gold. But this will occur only after the economic slump has spread to Europe and beyond.
The authorities will wait too long to act, believing their own decoupling myth. Unemployment will ratchet up. Civil unrest may rock Latin Europe.
In the end, the whole industrial world will stoke a fresh credit bubble to put off the day of reckoning, for another cycle.
The capitalist system is now so deformed by debt that it requires ever lower interest rates to keep going. It survives on perma-bubbles. Monetary rigour at this late stage would endanger democracy.
How did we ever let matters reach this pass?

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Hoop Disc: been buying stocks... Cash down from 90%-70% ..finger on the sell button ready to push on sign of sell signals.

Caution

lakedaemonian
07-04-2008, 09:46 AM
I've been sitting on the sidelines for sometime(with the exception of NZR).

I should have picked up Ebay when I posted here recently about it...my reluctance to do so would have seen a healthy profit.

I still think they'll do well in a downturn.......they are the world's biggest pawnshop...and the pawnshop owner wins when everyone else doesn't.

Other than that......I've seen the CANROYS(Canadian Royalty Trusts) come off their recent lows and are beginning to trend up. Selecting ones with strong yields and growing reserves could be a good way to hedge against the NZ dollar dropping off as predicted by some later this year, as well as hedging against ALL currencies depreciating.

I reckon if CANROYS deflate a bit with the global economy, they will not deflate as much, and will reinflate faster and higher...fairly safe in the long-term I reckon...especially if Soveriegn Wealth Funds have been gobbling them up to get out of their US Dollar hordes.

winner69
09-04-2008, 09:16 AM
Secular bear markets are all about changes in valuation .... not about price changes even though the 2 are linked to some degree

We have yet to see any significant change in valuations of the S&P. The forward looking PE ratio is still quite high and is driven from a base of record high earnings and margins.

I still expect to see the E in the PE ratio (at least in the US but likely over the world to come under pressure) which will then have an impact on the P part.

One view of what I am trying to say

http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2008/04/07/asleep-at-the-wheel-or-how-i-learned-to-stop-worrying-and-love-the-bomb.aspx

With a conclusion - [/i]the implied earnings declines are paltry. So the idea that the equity markets are anticipating a recession unfortunately looks to be yet another example of the triumph of hope over reality. I guess I really haven't learnt to stop worrying and love the bomb just yet! [/i]

Still rocky times ahead so stock selection remains the key and keeping a close eye on those charts

Hoop
11-04-2008, 12:17 PM
A bit of short term info:

A bear market rally set to go off ???

Author Jeff Cooper is best known as a day trader and a short term trader analyst.
His article (http://www.minyanville.com/articles/AAPL-rimm-LNN-VMI-clf-reversal/index/a/16662)was published yesterday before the Thursday S&P index close (1361 up 6).
Interesting reading for us bear market investors using the short term buy/sell within bear market rallies....or those bear market investors using shorting strategies

A quote from the article (http://www.minyanville.com/articles/AAPL-rimm-LNN-VMI-clf-reversal/index/a/16662)...."My instinct tells me that the index is pulling back the rubber band for an assault of that level. You seldom see quadruple tops – the fourth attempt typically sees follow-through, hence the term "Rule of 4 Breakout." The duration and strength of such a breakout, if and when it comes, and the behavior at 1420, if and when it's hit, will tell us much about the month of May. However, the triple tops beckon. I believe this first multi-day pullback should see these triple tops at 1390/1400 level magnetize the S&P higher.....

......I would exercise caution until 1362 is recaptured. If 1370 is regained and we get a strong Friday close on the important weekly close, it sets up the breakout I am anticipating. (Ed..Thursdays close 1361)

winner69
12-04-2008, 08:27 AM
A bit of short term info:

A bear market rally set to go off ???

..........I would exercise caution until 1362 is recaptured. If 1370 is regained and we get a strong Friday close on the important weekly close, it sets up the breakout I am anticipating. [/COLOR](Ed..Thursdays close 1361)

Hoop - looks like we all have a wait a bit longer now after Fridays action on the S&P

Hoop
12-04-2008, 10:22 AM
Hoop - looks like we all have a wait a bit longer now after Fridays action on the S&P
Yes...it seems a good chance of an upward break ended being one against the odds for the Short -term TA players.

Winner... The bear won this round, as no doubt you believe it would :):)

Jeff Cooper said Thursday and Friday were the pivottable days ...however it was a rubber band down rather than a rubber band up. I assume he has pulled the plug early Friday morning USA time.....unfortunately for us we have no luxury to bail and have to take it on the chin Monday morning in NZ.

This may answer the question on the other posts about the risks of trading in NZ on Friday afternoons....especially when the market is in a bear market phase.

Maybe an answer from an expert TA is needed as to where to from here after Friday's American market downturn.

It seems the investors were wishing the worst was over, bad news during the week were shrugged off until the catalyst (GE surprise profit fall 6%) burst the "worst is over" sentiment bubble.

I expect S&P 500 to test its support of 1300 now, closed 1332 (-2%) and the Dow to test its 12000 support Closed 12325 (-2%). Doesn't seem that far away does it (refer back to my 10-3 -2008 post for the figures if support breaks.

I'm going to take this 2% market fall as bad news, it seems no bear market rally for the time being and an odds on chance of another 10+% downturn in the making.

Maybe a warning should replace caution.

Disc: Stocks 30% cash 70% (% cash will increase Monday, risk outweighs the rewards)

winner69
13-04-2008, 08:42 AM
........ bad news during the week were shrugged off until the catalyst (GE surprise profit fall 6%) burst the "worst is over" sentiment bubble.


Haven't we been saying it is the E in the PE ratios that is under pressure (at least in the US and probably other parts of the world) and this will inevitability have an impact on the P as reduced earnings and lower PEs kick in.

S&P still on a relatively high PE and earnings are still forecast to increase .... yeah right

Hoop
13-04-2008, 12:31 PM
Haven't we been saying it is the E in the PE ratios that is under pressure (at least in the US and probably other parts of the world) and this will inevitability have an impact on the P as reduced earnings and lower PEs kick in.

S&P still on a relatively high PE and earnings are still forecast to increase .... yeah right



I think we will be mentioning these facts over and over again until we are blue in the face and most will still not embrace it....Unfortunately the big worry is the financial power brokers from large economic countries are seemingly ignoring it as well, probably is a mistaken belief that it may cause a negative over reaction.

All that research from past market cycles shows significantly the ebbs and flows of overall PE ratio values.... it's been proven time and time again throughout history....some of that research posted here on this thread by you and yet only a small number of investors and analysts seem to embrace it, or worse ..investors who don't even know about or care... or worse still... think it wont work this time.

It's amazing how so many people take their eye of the bigger picture and waste their valuable time and money on the insignificant day by day issues, much of it manipulated by emotion of the day and then plan their longer term strategy around those day by day events.

As mentioned on this thread, there has been a wealth of study over many decades proving that investors/analysts over estimate earnings in a bear market phase.....

....oh well Winner...such is life.

Hoop
17-04-2008, 09:31 AM
A bit of short term info:

A bear market rally set to go off ???

Author Jeff Cooper is best known as a day trader and a short term trader analyst.
His article (http://www.minyanville.com/articles/AAPL-rimm-LNN-VMI-clf-reversal/index/a/16662)was published yesterday before the Thursday S&P index close (1361 up 6).
Interesting reading for us bear market investors using the short term buy/sell within bear market rallies....or those bear market investors using shorting strategies

A quote from the article (http://www.minyanville.com/articles/AAPL-rimm-LNN-VMI-clf-reversal/index/a/16662)...."My instinct tells me that the index is pulling back the rubber band for an assault of that level. You seldom see quadruple tops – the fourth attempt typically sees follow-through, hence the term "Rule of 4 Breakout." The duration and strength of such a breakout, if and when it comes, and the behavior at 1420, if and when it's hit, will tell us much about the month of May. However, the triple tops beckon. I believe this first multi-day pullback should see these triple tops at 1390/1400 level magnetize the S&P higher.....

......I would exercise caution until 1362 is recaptured. If 1370 is regained and we get a strong Friday close on the important weekly close, it sets up the breakout I am anticipating. (Ed..Thursdays close 1361)

Well folks it seems like ground hog day...a week later we are back to that stage of a week ago....another attempt to break resistence level.
Jeff Cooper could have saved himself the embarassment and postponed publishing this article until this week instead of last week :)

FTSE100 has yet again broken the 6000 resistence level (the previous 3 sucessful attempts ended up being false breaks (bull traps))...... So this time????

The DOW ASX Hang seng Nikkei S&P500 are all nudging at the top end of their downtrend lines...so is there going to be a globial breakout???
or a bull trap???

A key sentence rings out...."During a Bear market phase the market has the ability to disappoint".

Ironically with all this upswing in the indices, I am even more cautious now.

Disc : Cash 60% shares 40%
Heavy weighted in NZO PPP PRC... light weighted in MFT GPG

Hoop
19-04-2008, 01:27 PM
Update

Below are the present index levels and their resistance levels (RL).

Index....... Present ..........Major R L .........Next Impt RL

Dow ...........12849 ...............12800 breached..13000
S&P500.... ...1390................ .1400 ................1450
FTSE100... ...6057.................6000 breached....6100
Hang Seng...24198............ ...26000
Nikkei .........13476 ...............13600 ..............14700
ASX.............5504............... .6000..................6400
NZX ............3557............... .3900

Jeff Cooper will be smiling this time

Bull traps?? or a Jeff Cooper breakout??

AMR
10-05-2008, 09:17 AM
DJIA currently sitting just below the support/resistance level of 12800. SP500 is below 1400. Prices might waver around support and resistance a bit, but the falls of the last two days are worrying.

Hoop
10-05-2008, 12:18 PM
DJIA currently sitting just below the support/resistance level of 12800. SP500 is below 1400. Prices might waver around support and resistance a bit, but the falls of the last two days are worrying.

Yes AWR, It could end up to be a very important signal.
Enough so to alert a warning

There are two schools of thought at the moment
1...... Bear market, experiencing a bully market rally at present.
2...... Extended Bull market, experiencing a trough formation but will recover to test 2007 highs at some stage. Most in this group now agree the trough may be longer than first thought.

Fridays close will be what Group 1 expects and their investment strategies are in place to handle this expectation. Group 2 may now be having second doubts as the trough is turning into a down wave pattern something that a 100% equity investor may lose sleep over.

As I am in the Group 1 category and see primary supports giving way on the DOW and S&P 500 it signals to me a possibility of an end to the Bear Market rally and the previous sudden uptrend was a typical bull trap. So I have these possibilities of a sudden fall imprinted on the back of my mind.

Group 2 may counter argue that this present downturn is bear trap and the indices will soon rise again :)


Also of note are the Global markets are starting to disconnect. The FTSE & NIKKEI is still above their primary supports and NZE and ASX never got to the stage of experiencing any breaking of primary resistances just a change in trends. Also negative news data suggesting a sharp drop in economic activity and a property market hard landing caused the NZX to turn down a couple of days ago. Whether the DOW and S&P has a large effect on the NZX is not known yet.

This new DOW downturn may see a temporarily larger flight of money to hot commodities (inverted correlation equity/commodity principals), temporarily leaving lesser available money in the equity market system.

Next week will be interesting.

Disc
Shares 50% /cash 50%.
PRC NZO PPP LMP GPG

AMR
15-05-2008, 05:13 PM
Brent steenbarger reports from traderfeed that the small caps and NASDAQ are starting to rally. The rally is spreading :)

Mick100
06-06-2008, 09:55 AM
The Stock Market’s Secular Trend


Steve Saville
Below is an extract from a commentary originally posted at www.speculative-investor.com (http://www.speculative-investor.com/) on 25th May, 2008.
This is a topic we've covered numerous times over the years, but it's so important that we are re-visiting it in today's report.
There's a big difference between a stock market that's rising in real (purchasing power) terms and one that's only rising due to currency depreciation. The reason is that a smart person invests to obtain more purchasing power, not more money. To put it another way, the amount of money you have is meaningless; what matters is the amount of purchasing power you have. At this time, for example, someone with a net worth of 100 million Zimbabwe dollars would be considered poor whereas someone with a net worth of 100 million US dollars would be considered rich; but if the US$ continues to lose purchasing power then at some point in the future a person with a net worth of 100 million US dollars will not be considered rich.
Further to the above, the stock market's secular trend can't reasonably be determined by referring to nominal price changes. In particular, just because the stock market happens to be making new highs in nominal price terms doesn't mean that a secular bull market is in progress. If it did -- that is, if the main consideration was the nominal price change -- then the richest people in the world today would be those who invested in the Zimbabwe stock market five years ago.
As discussed in many previous commentaries, the best way to 'see' the US stock market's secular trend is to look at a long-term chart of either the market's valuation (price/earnings ratio) or the market's performance relative to gold. As illustrated by the following chart-based comparison of, from top to bottom, the S&P500 Index, the earnings of the S&P500 Index, the S&P500's price/peak-earnings ratio, and the Dow/Gold ratio, over the past 80 years these alternative ways of ascertaining the stock market's real long-term trend have always yielded the same result.
http://www.gold-eagle.com/editorials_08/images/saville060308a.gif
The reason why the stock market's REAL long-term trend is so clearly defined by long-term trends in valuation and performance relative to gold is that investors, as a group, will invariably pay less for earnings that are perceived to be artificially boosted by inflation than for earnings that are perceived to be the result of real (sustainable) growth. Notice, for example, that the S&P500's earnings grew just as rapidly during the secular bear market of 1966-1982 as during the secular bull markets of 1942-1966 and 1982-2000. The difference is that during 1966-1982 there was increasing recognition of an inflation problem, leading to the compression of price/earnings multiples and dramatic weakness in the stock market relative to gold.
Nobody can make predictions with absolute certainty because the future is unknowable, but the performances of the S&P500's price/earnings ratio and the Dow/Gold ratio constitute very powerful evidence that a secular bear market commenced during 1999-2001 and is not yet close to being over.
June 2, 2008
Regular financial market forecasts and
analyses are provided at our web site:
http://www.speculative-investor.com/new/index.html (http://www.speculative-investor.com/new/index.html)

Mick comment:
this article point out what winner has been saying - even if earning hold up or continue increasing, PE's still fall during secular bears so share prices go sideways.
Better make sure your in the right sectors (food , energy, PM's) because the rest of the share market is probably going to go sideways for a long time - like 10-15 years
,

Lizard
27-06-2008, 03:56 PM
NZX - If we are playing "guess the bottom" I have a level at the mid 3700's as next in line to provide an decent reversal. There is a more scary scenario which sees 3120 ish for the low - funny, that seems hard to imagine, but still less than a 30% fall off the high.

That 3120 ish is a bit less hard to imagine now than it was back in early January when the above was posted. To be honest, I'm feeling a bit less sanguine about it being the ultimate "scary scenario" low. More scary ones spring to mind...

... still, if we're going to play "guess the bottom" (which I know we all shouldn't do) and buy stocks, I am thinking next week might bring some opportunities - most of the buys I made on previous dips seem to be still in profit, so I'm willing to give it a small go.

Not expecting another bull market in a hurry though.

Kookaburra
08-07-2008, 12:11 PM
This is what I think we are up against and my reason to stay out of this bear market, at present lacking the skills to short successfully.

COMMENTARY: THE WEEKEND INTERVIEW


Theodore J. Forstmann
The Credit Crisis Is Going to Get Worse

By BRIAN M. CARNEY
July 5, 2008; Page A9


New York
Twenty years ago, Ted Forstmann contributed a scathing – and prescient – op-ed to this newspaper warning that the junk-bond craze was about to end badly: "Today's financial age has become a period of unbridled excess with accepted risk soaring out of proportion to possible reward," he wrote in October 1988. "Every week, with ever-increasing levels of irresponsibility, many billions of dollars in American assets are being saddled with debt that has virtually no chance of being repaid."
http://s.wsj.net/public/resources/images/OB-BT902_oj_win_20080704142839.jpgIsmael Roldan Within a year, the junk-bond market had collapsed, and within 18 months Drexel Burnham Lambert, the leading firm of the junk-bond world, was bankrupt. Mr. Forstmann sees even worse trouble coming today.
For a curmudgeon, he is a cheerful man. When we met for lunch recently in a tony midtown restaurant, he was wearing a well-tailored suit, a blue shirt and a yellow tie. He spoke with the calm self-assurance of someone who has something to say but nothing left to prove.
"We are in a credit crisis the likes of which I've never seen in my lifetime," Mr. Forstmann warns. He adds: "The credit problems in this country are considerably worse than people have said or know. I didn't even know subprime mortgages existed and I was worried about the credit crisis."
Mr. Forstmann denies being an expert in the capital markets. But he does have some experience with them. He was present at the creation of the private-equity business. The firm he co-founded, Forstmann Little, rode the original private-equity boom in the 1980s while skirting the excesses of the junk-bond craze in the later years. It was for a time the most successful private-equity firm in the world, renowned for both its outsize returns and its caution. For two years after Mr. Forstmann wrote his 1988 op-ed, Forstmann Little sat on $2 billion in uninvested funds, waiting for the right opportunities. Savvy investments in Dr. Pepper and Gulfstream, among others over the years, helped make Mr. Forstmann a billionaire.
These days, he devotes most of his professional attention to IMG, the sports and entertainment agency. But the economy has him worried.
Mr. Forstmann's argument about the present crisis starts with the money supply. After Sept. 11, 2001, the Federal Reserve pumped so much money into the financial system that it distorted the incentives and the decision making of everyone in finance. He illustrates this with what he calls his "little children's story": Once upon a time, when credit conditions and the costs of borrowing money were normal, the bank opened at 9:00 a.m. and closed at 5:00 p.m. For eight hours a day, bankers made loans and took deposits, and then they went home.
But after 9/11, the Fed opened the spigot. Short-term interest rates went to zero in real terms and then into negative territory. When real interest rates are negative, borrowing money is effectively free – the debt loses value faster than the interest adds up. This led to a series of distortions in the financial sector that are only now coming to light. The children's story continues: "Now they [the banks] have all this excess money. And they open at nine, and from nine to noon or so, they're doing all the same kind of basically legitimate things with it that they did before."
So far, so good. "But at noon, they have tons of money left. They have all this supply, and the, what I would call 'legitimate' demand – it's probably not a good word – but where risk and reward are still in balance, has been satisfied. But they're still open until five. And around 3:30 in the afternoon they get to such things as subprime mortgages, OK? And what you guys haven't seen yet is what happened between noon and 3:30."
Straightforward economics tells us that when you print too much money, it loses value and prices go up. That's been happening too. But Mr. Forstmann is most concerned with a different, more subtle effect of the oversupply of money. When it becomes too plentiful, bankers and other financial intermediaries end up taking on more and more risk for less return.
The incentive to be conservative under normal credit conditions is driven in part by what economists call opportunity cost – if you put money to use in one place, it leaves you with less money to invest or lend in another place. So you pick your spots carefully. But if you've got too much money, and that money is declining in value faster than you can earn interest on it, your incentives change. "Something that's free isn't worth much," as Mr. Forstmann puts it. So the normal rules of caution get attenuated.
"They could not find enough appropriate uses for the money," Mr. Forstmann says. "That's why my little bank story for the kids is a fun way to put it. The money just kept coming and coming and coming and coming. What are you going to do with it? IBM only needs so much. The guy who can really pay his mortgage only needs so much." So you start thinking about new ways to lend the money, which inevitably means riskier ways.
"I don't know when money was ever this inexpensive in the history of this country. But not in modern times, that's for sure."
Combine this with loan syndication and securitization, and the result is a nasty brew. Securitization and syndication allow the banks to take the loans off their books and replenish their capital. They then use this capital to make new loans, which they securitize or syndicate and sell to the hedge funds, which buy them with the money they borrowed from the banks. For a time, everyone makes money.
In fact, for six years, a lot of people made a lot of money in this environment. So much money that, as Mr. Forstmann notes, the price of admission to the Forbes 400 list of the richest Americans has gone from $500 million 10 years ago to over $1 billion today. (Mr. Forstmann was bumped from the list two years ago, his reported 10-figure net worth no longer enough to keep pace.)
At the same time, both the size and the number of hedge funds and private-equity funds have ballooned. "I used to have one of the biggest private-equity funds in the world," he says matter-of-factly. "It was, I don't know, $500 million or a billion dollars. If you don't have a $20 billion fund now, you're kind of a [nobody]," Mr. Forstmann says. (The term he used to describe those of us without $20 billion PE funds was both more colorful and less printable than "nobody.") "And so what does that tell you?"
Mr. Forstmann hasn't raised a new fund in four years. But he doesn't blame the hedge funds or the private-equity funds – they are not the villains in his story. "Fundamentally, I don't see them as a cause," he says. "Obviously the proliferation of hedge funds and private-equity funds has created its own dynamic. But this proliferation is simply a result of the vast increase in the money supply."
Mr. Forstmann has been around a long time, so he's seen a lot. But is it possible that he's simply fallen behind the times? By his own description, he's a bit of a figure from another age – "a bit like Wyatt Earp in 1910."
But it would be a mistake to dismiss Mr. Forstmann's pessimism too quickly. After all, he knows something about both credit and crises.
"You've got [Treasury Secretary Henry] Paulson saying 'Oh, you see the good news is it's over.'" The problem, according to Mr. Forstmann, is that it's far from over. "I think we're in about the second inning of this." And of course, the credit crisis wasn't even supposed to last this long. "This all started in August [of 2007], and it was going to get cleared up by October. It hasn't gotten cleared up at all."
One reason is that the proliferation of new financial instruments has left the system more closely intertwined than ever, making a workout, or even a shakeout, much more difficult. Take what happened to Bear Stearns. "What should the health of one brokerage firm in America mean to the entire global financial system? To an ordinary person, probably not much. But in today's world, with all the interdependence, a great deal."
This circular creation of new credit, used to buy more newly created debt, all financed by ultracheap money and all betting with each other, has left the major firms hopelessly intertwined. "It's very interrelated," he says, locking his fingers together. "There's trillions and trillions of dollars that slosh around between all these places and if one fails . . ." He doesn't finish the thought.
Early in our conversation, Mr. Forstmann describes his conversational style as "Faulknerian." The word fits. He jumps between thoughts, examples and anecdotes in a pure stream of consciousness. One such aside is about Warren Buffett and the rule of the three "I"s.
"Buffett once told me there are three 'I's in every cycle. The 'innovator,' that's the first 'I.' After the innovator comes the 'imitator.' And after the imitator in the cycle comes the idiot. Which makes way for an innovator again." So when Mr. Forstmann says we're at the end of an era, it's another way of saying that he's afraid that the idiots have made their entrance.
"We're in the third 'I' for sure," he interjects an hour after first introducing the "rule." "And that always leads to something. Innovators don't just show up. Some disaster takes place because of the idiots, and then an innovator says, oh, look at this, I can do this, that or the other thing." That disaster is now.
In other words, "In order to fix what's going on in the United States there's going to have to be a certain amount of pain. The market's going to have to clear somehow. . . and it's hard for me to believe that it gets fixed without" upheaval in the financial system, the economy and the country as a whole. "Things are going to fail. Enterprises are going to fail. The economy is going to slow," he warns.
To be clear, although Mr. Forstmann talks about "fear and greed" getting out of whack, his is not a condemnation of "greedy speculators" or a "culture of greed" or any of the lamentations so popular among the populists in Washington. It is a diagnosis of the ways in which the financial sector responded to a government policy of printing money that was free, or nearly so. "The creation of much too much money caused all of this excess," he says. In other words, his is not an argument for draconian regulation, but for sound money.
Nor does he blame Alan Greenspan, even though he argues that this all started with the dot-com bubble and 9/11. "Greenspan," he allows, "had really tough decisions to make, so I don't think it's a black-and-white kind of thing at all." It was, and is, rather, "a case of first impression." Mr. Greenspan, he says, admits that he was "totally sure" that what he was doing was right. But he had "no idea what the consequences [were] going to be."
According to Mr. Forstmann, we are now living with those consequences. And the correction has only begun.
Mr. Carney is a member of the editorial board of The Wall Street Journal.

Dr_Who
08-07-2008, 06:37 PM
There is talks that the US could possibly go into depression.

shasta
08-07-2008, 06:59 PM
There is talks that the US could possibly go into depression.

Hopefully ADY's supply of Lithium can come in handy, if that happens...

Only a short trip from Argentina ;)

Kookaburra
09-07-2008, 11:59 AM
Hopefully ADY's supply of Lithium can come in handy, if that happens.. ;)

Put it in the water supply and it should reduce the problem of bubbles as well.

dumbass
10-07-2008, 07:26 PM
here's my look at the sp500 from predominately an elliot wave perspective.

Elliot wave is particularly good for analysis of the big picture allowing some reasonable long range targets.
i have spent alot of time looking back in the historical charts at previous bear markets and drawn the following conclusions mainly based on elliot wave guidelines

looking from recent bull market wave starting in 2002, there has been 5 waves up (NUMBERS ON CHART) with the 5th wave posting an extended wave (ROMAN NUMERALS)

when a 5th wave extends the market will frequently retrace the complete 5th wave extension IE WILL RETRACE TO END OF WAVE 4

this sets up a bear market target to the 4th wave completion 1060 area posted in aug 2004
this is also the 61.8 retracement of the complete 5 waves up from 2002

this is also equivalent to A wave = C wave (frequent occurence)

I believe the fed will play a major part in the progress of this bear market as they have done in most major corrections in the recent past and possibly there actions may create rallys and even precipitate a bottom.
they took aggresive action in market at 1370 and again at 1270 marked in red which created strong rallys

possible the next level they may deem as critical is 1170 ( 50 % retracement )

and then 1070 ( 61.8 retracement ) which i believe may be the bottom

the fed have always seemed to have a slant towards maitaining the equity markets at all cost , obviously this would come at the expense of the US dollar which i believe is going to hell and that does not appear to be a concern for them

so watch out for those emergency measures and possible rallys but im still trading from the short side

AMR
13-07-2008, 01:42 PM
More bad advice from the Herald.

"Ride it out, seek advice, diversify your investments... and whatever you do, don't panic."

Mick100
21-07-2008, 10:57 PM
An excellent artile by Adam Hamilton
- quite a long read but worth it

http://www.gold-eagle.com/gold_digest_08/hamilton071808.html

Kookaburra
21-07-2008, 11:22 PM
Hmm. Interesting but I woudl not like to be putting significant money into commodities at present.

Jess9
22-07-2008, 08:12 PM
I agree with Mick100, in that money will be made in good commodities in the next stage of the cycle. However, timing of entry into such stocks requires some very very careful management IMHO.

In this respect that old saying... making the $$$ when you buy - is particularly acute. In respect of this, I must remind myself daily as "cheap" commodity stocks keep ending up cheaper, on an average basis ; )

Mick100
25-07-2008, 11:10 PM
Are you ready for something happy? Below we see a daily chart of the D-J Transportation Average. The Transports have moved steadily higher in the face of the declining Dow and in the face of the worst kind of economic news. Why argue with the Transport action (as many people are doing) -- it's a fact, it's happening. This is money talking. You might as well argue with gravity or the waves of the ocean.

Note that the Transports have not only refused to confirm the Industrials, they have build a rising three-level structure, which I show with the help of the three blue horizontal lines. It's difficult for me to see a big bear market developing while the Transports are diverging so strongly.

So what are we dealing with here? I'm just going to call it a mixed and confusing market. But it's a market that I would still treat with caution. When the Averages disagree, it's best to be cautious. Robert Rhea, the great Dow Theorist of the 1930s, wrote that "when the Averages disagree, it's usually a sign of distribution." That's a warning I've never forgotten. I pass it on to you for your consideration.

But hey, you've got to be impressed by those Transports. If it's a bear market, the Trannies aren't listening!

http://www.gold-eagle.com/gold_digest_08/images/russell072308d.gif

Richard Russell
Editor-in-chief - DOW THEORY LETTERS
http://ww2.dowtheoryletters.com (http://ww2.dowtheoryletters.com/)

July 23, 2008

The inimitable and venerable Mr. Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron's during the late-'50s through the '90s. Through Barron's and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-'66 bull market. And almost to the day he called the bottom of the great 1972-'74 bear market, and the beginning of the great bull market which started in December 1974.

STRAT
26-07-2008, 12:26 PM
Thanks Mick,
Nice post.

Jess9
26-07-2008, 02:23 PM
Thanks Mick, from me also.

I'm still more cash than shares, but will re-consider - after a few more weeks, enough time for the NAB thing to spread further, if it is to occur. Be very good to either explode that "bomb" now, or have it shown to be a dud. So we can move on post sub prime et al, or at least continue working through it towards a issue over/contained...

Hoop
26-07-2008, 05:32 PM
Like all subscription sites they don't tell you what they didn't get right.
Most Dow theory followers and their counterparts (TA analysts and EW principlists) had by the end of November 2007 convinced themselves that a bear market was going to happen...meanwhile the old guru Richard Russell was still fence-sitting at Xmas time. Fair enough as the TA guidelines for a Bear market did not happen until 2 weeks later in early January.Quote from Investment Postcards Dec2007 (http://investmentpostcards.wordpress.com/2007/12/30/words-from-the-wise-for-the-week-that-was-dec-24-%E2%80%93-30-2007/)
In the words of market veteran Richard Russell, author of the Dow Theory Letters (http://www.dowtheoryletters.com/): “This market cannot make up its mind. The bullish case is strong, the bearish case is strong, and a lot of very big money is very divide on the outlook for the stock market. Thus - we have a very nervous, high volatility market with the Dow jumping over 100 points (up or down) every other day. It’s enough to give an honest man the ‘willies’.”

I would only give a "c" pass mark with the above quote however because a good Dow expert (and Richard is ) would know by then (or at least 90% certain) that a technical (TA) bear market was near.....On the 9th of January 2008 the DOW and S&P 500 went into a technical Bear Market phase (see my post #55 (http://www.sharetrader.co.nz/showthread.php?t=5171&page=4) (9th Jan 2008). Also Dow theory points to high volatility around market phase changes.
A week later the NZX50 followed into Technical Bear market as well.
In my post#56 (15 Jan 2008) NZX50 now in bear market phase I outlined proven investment Strategies an investor could chose from to fight the bear.

MicK100 I assume you are subscribed to his site I would interested to know if Richard Russell acknowledged the DOW bear Phase when it happened on 9 Jan2008

....Interesting to note that it took another 6 months before it became an official bear market....

Also one has to be aware that subscripted site use part of the story to fit their product they are trying to sell, and why not!!! they have to market their product anyway they can.

It is well known fact that the DJ Transport index was used as a precursor for the Dow in previous years. If the Transport index breaks a trend-line or alters it phase the DOW index will follow later..therefore giving these DOW/DJT watchers a forward prediction on which way the DOW is going to move.

On Micks chart it shows the DJT is not in a bear phase which is true, but doen't tell the whole story, only the part story Richard Russell want's to tell
Look at my comparison chart (DJT V DOW) below extended to 5 years for a clearer viewpoint The DJT (in blue) doesn't look that great compared with with the year chart from Dow Theory Letters does it?

The DJT gave 2 months trend-line break warning for the DOW (circle) back in October 2007

The DJT has performed twice as good than the DOW within the last five years.

Note the DJT has failed again to break the 5500 resistance level and has fallen back breaking its medium trend-line. (giving the DOW a 2 months notice???) [latest circle]

Jess9
26-07-2008, 07:38 PM
Thanks very much Hoop. Australian $ s/term deposit looking quite attractive ; )

Jess9
26-07-2008, 08:06 PM
Hoop, I guess your last line puts "an event" post the Olympics. I think an ex-builder who posts around here was also predicting "the crash" for then? Time will tell - and soon. Thanks for your analysis and strategies, as always thought provoking and appreciated!

Hoop
26-07-2008, 09:35 PM
Thxs for those kind words Jess
Trying to analyse a bear market is very complex, and often prediction is not possible, but sometimes in researching past bear behaviour from different researchers I occasionally comes across predictable behaviour that are similar in pattern...I call that "all the ducks lining up in a row". This happened late 2007 which alerted many people including myself to believe the Bull run was ending.

Unfortunately this article's duck (below) does not line up properly with my last posts duck, which is not surprising, but it does line up with Micks post (re Richard Russell)

An article written by Hussman Funds in their research area tries to tackle the thorny issue of how long a bear lives for and how intense that bear is.
They identified two types of bear.....an bear with a recession and bear without recession.

Note this article was written in September 2007 at the top of a bull market

A paragraph from the article
Recessions present multiple layers of risks to investors. They are difficult to forecast. They are often difficult to identify even after they've begun. The bear markets they spawn are longer in average duration, represent some of the deepest declines, and are indifferent to starting P/E multiples. And most maliciously, much of the damage to stock prices is often done in a recession's early stages, when the economic evidence is the foggiest. Even so, there are various sets of indicators that have a good record for identifying recession risk. With those indicators increasingly giving warning signals, investors should be vigilant.

In gathering information from this paragraph, it seems that although this bear still has someway to go in duration its damage to stock prices may be mostly done. This gives us a glimmer of hope that the time to re-enter the market and pick up the bargains is getting closer

click here for the full article (http://www.hussmanfunds.com/rsi/recessionbears.htm)

Hoop
30-09-2008, 09:34 PM
Update
The Stock Market bear market phase has been in progress for 10 months. It has been a mild bear so far for US Europe Aust and NZ but more severe for Asia especially China


At the moment no one on Sharechat is mentioning the Dow Theory, which is the foundation stone to investment doctrine.
At this very point of time something very important is happening... phase 3 of the Bear market has commenced a week or so ago..this is the last phase before this bear dies... Dow Theory outlines this phase behaviour (http://stockcharts.com/school/doku.php?id=chart_school:market_analysis:dow_theor y)... Dow Theory may not predict the future but it informs the investor where he/she is within a market cycle, so investment planning for the next phase can start.

We should put emotion to one side, cover your ears and eyes to emotive market noise which is deafing at the moment due to the despair of capulation and concentrate on doing company analysis (FA) so to select the best recovery shares quickly when the time comes.

Sounds easy but ......

Kookaburra
01-10-2008, 05:29 PM
Yen is proving a good counter-cyclical way of holding cash in this bear market. I will continue with this in the interim. As you say Hoop, Dow theory has a big decline in store for us now. If I remember correctly the 3rd wave down is likely to be the longest. I think the graph suggests a target on the Dow of about 7500 though being out of the market I have given up watching.

Hoop
11-10-2008, 04:04 PM
The c wave is presently occurring (capitulation) and stock markets around the world are falling rapidly.

Arco produced a PE Ratio chart post #73 (http://www.sharetrader.co.nz/showthread.php?t=5689&page=5) showing rapidly falling P/E ratio values for the S&P 500.

Noting the P/E Ratio.. if this present bear cycle shake out continues and P/E falls below 10, once the P/E Ratio rises again, it will signal the end (prematurely) of the secular Bear Market cycle and a commencement of the new secular Bull market cycle.

At the moment this is not yet the case but as the situation stands at the moment, the life of the secular bear market cycle is at risk of being shortened or even prematurely terminated

Previously on this tread we have mentioned the duration of the secular bear averages about 11 -13 years but the determination depends on the P/E Ratio, not time. The Wall St crash in 1929-1932 those 4 years drop killed the secular bear in 4 years. We estimated (earlier postings) that under "normal" situations that the secular bear would survive until about 2014 it seems it could be now 2008/ 2009 ?? that is if this bear market lives on into 2009.

It seems even the very black clouds have silver linings.

If (and when) a secular Bull market is created investment strategies would have to be altered, long term investing will become a much more profitable venture.


***This post refers to the DOW index in particular, but S&P500 would be similar.

Lizard
12-10-2008, 04:58 PM
Just for interest, I've been tracking NZX price/sales data for a while now. I reckon that at least takes out the issue of "peak margins", even if it doesn't allow for changes in debt levels.

I have only gone back as far as 1998, due to data problems - trying to stay consistent and sticking to NZX50 stocks which were still listed back then. Clearly that limits the pool a bit, but with P/S varying alot between types of stocks, I wanted to use the same companies.

This week's dramatic fall finally saw P/S ratios fall back below where they were at the low of 1998, after roughly a 30% decline in the NZSE40, following the Asian crisis and NZ drought. Also now 18% below P/S at the beginning of this bull run (2003) and 34% below the peak (2007).

That means that with static share prices, revenues could still drop 18% and we'd only fall back to the levels at which the last bull run started. Though I guess with NZer's having been overspending by around 14%, then 18% falls in revenue are not unrealistic?

Hoop
19-10-2008, 10:45 AM
While watching CNBC this morning they had a programme on when the bear would end one of the people on the show being interviewed was Russell Napier.
Below is a review from his book which is starting to be noticed at the moment.
I might wander down to the library this week.


Book Review: Anatomy of the Bear (http://www.thestockbandit.net/2007/01/29/anatomy-of-the-bear-review/)

29 Jan 2007 11:00 pm Book Reviews (http://www.thestockbandit.net/category/book-reviews/)Jeff White (http://www.thestockbandit.com/AboutTheBandit.htm)
I love to read trading books, so when I was asked to review Russell Napier’s book, Anatomy of the Bear (http://www.amazon.com/Anatomy-Bear-Lessons-Streets-Bottoms/dp/9628606794/?tag=wwwthestockba-20), I happily obliged.
In the book, Napier examines 4 major bear market bottoms on Wall St., with a portion of the book devoted to each of the major lows created in 1921, 1932, 1949 and 1982. Napier looks at the history of these bear markets, the events leading up to them, and how the investors of those times were impacted throughout the bottoming process. In his research, he examined some 70,000 articles from the Wall Street Journal from the two months before and after the final lows were made, adding some valuable perspectives from the media and traders of the day. These article tidbits give some great insights into life in the trading trenches at the time, which is incredibly helpful in painting the picture of the doom and gloom which ultimately accompanies a lasting market bottom.
http://www.thestockbandit.net/wp-content/my-images/Napier.gif (http://www.amazon.com/Anatomy-Bear-Lessons-Streets-Bottoms/dp/9628606794/sr=1-3/qid=1170129449/ref=pd_bbs_3/105-5080638-9525259?ie=UTF8&s=books) Anatomy of the Bear by Russell Napier
Napier also takes the reader back to the situations of each of the major lows, essentially transporting you to the time and the events which led up to the bear phases. He examines wars, monetary policy, politics, economic factors, and anything else which had an impact on the buying and selling motivations of traders, making this book an incredible resource for anyone wanting to learn from lessons of the past.
Here are a few things I found noteworthy:
* Earnings Trailed Price. In the 1921 bottom, price found a low about 4 months before earnings found a bottom. Earnings bottomed some 5 months after price bottomed in the 1932 bottom. That makes for some interesting fundamental vs. technical discussion! (You know which side I’m on)
* Short Interest Stayed High After Lows. Napier discovered that short interest remained rather high even after price made a low, serving as a good reminder that even bears get greedy. In turn, as the shorts end up having to buy to exit their positions, it propels prices even higher, perpetuating the newfound momentum. Napier notes that a large short interest combined with a market that didn’t decline on bad news was an excellent signal in the 1921, 1932 and 1949 lows.
* Bear Markets Don’t Scare You Out. The results of Napier’s research flies somewhat in the face of theories which indicate that capitulation marks a lasting low, revealing instead that bear markets typically end with a final decline on no volume. Essentially, bear markets wear you out, not scare you out.
* Commodities Count. The end of commodity price declines also marked all 4 major equity lows, with copper playing a prominent role as it preceded or coincided with every equity rebound.
The book also ends with a great number of strategic and tactical conclusions drawn from the study of these 4 great bear markets - plenty of reason alone to check out this book.
Thanks to Russell Napier for the chance to review this fine study of the past, I enjoyed the read and learned a great deal from the bear markets of the past.
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com (http://www.thestockbandit.com/)
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shasta
19-10-2008, 10:48 AM
While watching CNBC this morning they had a programme on when the bear would end one of the people on the show being interviewed was Russell Napier.
Below is a review from his book which is starting to be noticed at the moment.
I might wander down to the library this week.


Book Review: Anatomy of the Bear (http://www.thestockbandit.net/2007/01/29/anatomy-of-the-bear-review/)

29 Jan 2007 11:00 pm Book Reviews (http://www.thestockbandit.net/category/book-reviews/)Jeff White (http://www.thestockbandit.com/AboutTheBandit.htm)
I love to read trading books, so when I was asked to review Russell Napier’s book, Anatomy of the Bear (http://www.amazon.com/Anatomy-Bear-Lessons-Streets-Bottoms/dp/9628606794/?tag=wwwthestockba-20), I happily obliged.
In the book, Napier examines 4 major bear market bottoms on Wall St., with a portion of the book devoted to each of the major lows created in 1921, 1932, 1949 and 1982. Napier looks at the history of these bear markets, the events leading up to them, and how the investors of those times were impacted throughout the bottoming process. In his research, he examined some 70,000 articles from the Wall Street Journal from the two months before and after the final lows were made, adding some valuable perspectives from the media and traders of the day. These article tidbits give some great insights into life in the trading trenches at the time, which is incredibly helpful in painting the picture of the doom and gloom which ultimately accompanies a lasting market bottom.
http://www.thestockbandit.net/wp-content/my-images/Napier.gif (http://www.amazon.com/Anatomy-Bear-Lessons-Streets-Bottoms/dp/9628606794/sr=1-3/qid=1170129449/ref=pd_bbs_3/105-5080638-9525259?ie=UTF8&s=books) Anatomy of the Bear by Russell Napier
Napier also takes the reader back to the situations of each of the major lows, essentially transporting you to the time and the events which led up to the bear phases. He examines wars, monetary policy, politics, economic factors, and anything else which had an impact on the buying and selling motivations of traders, making this book an incredible resource for anyone wanting to learn from lessons of the past.
Here are a few things I found noteworthy:
* Earnings Trailed Price. In the 1921 bottom, price found a low about 4 months before earnings found a bottom. Earnings bottomed some 5 months after price bottomed in the 1932 bottom. That makes for some interesting fundamental vs. technical discussion! (You know which side I’m on)
* Short Interest Stayed High After Lows. Napier discovered that short interest remained rather high even after price made a low, serving as a good reminder that even bears get greedy. In turn, as the shorts end up having to buy to exit their positions, it propels prices even higher, perpetuating the newfound momentum. Napier notes that a large short interest combined with a market that didn’t decline on bad news was an excellent signal in the 1921, 1932 and 1949 lows.
* Bear Markets Don’t Scare You Out. The results of Napier’s research flies somewhat in the face of theories which indicate that capitulation marks a lasting low, revealing instead that bear markets typically end with a final decline on no volume. Essentially, bear markets wear you out, not scare you out.
* Commodities Count. The end of commodity price declines also marked all 4 major equity lows, with copper playing a prominent role as it preceded or coincided with every equity rebound.
The book also ends with a great number of strategic and tactical conclusions drawn from the study of these 4 great bear markets - plenty of reason alone to check out this book.
Thanks to Russell Napier for the chance to review this fine study of the past, I enjoyed the read and learned a great deal from the bear markets of the past.
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com (http://www.thestockbandit.com/)
Technorati Tags: Stock Market Books (http://technorati.com/tag/Stock+Market+Books), Bear Market (http://technorati.com/tag/Bear+Market), Stock Market Lows (http://technorati.com/tag/Stock+Market+Lows), Russell Napier (http://technorati.com/tag/Russell+Napier)



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Thanks for posting that Hoop.

Wouldn't mind grabbing myself a copy (interesting comment re Copper ;))

Hoop
19-10-2008, 02:08 PM
An Audio interview with Russell Napier (http://www.wallstreetreporter.com/page.php?page=featured&id=27637). Remember this interview was on 10 Dec 2007.

Excerpts from this interview

...With all bears market bottoms there is an issue about Banking instability and a huge degree of uncertaincy....

....Key tings that people get wrong is when we get into a period of defation or risk of deflation they can't see the change in stability....

...At the bottom (bear market) there is a rally in the Government bonds market and treasury market prior to the rise in equity markets,also a rally in corporate bond market which is of short duration usually about one month before the rise in the equity market. Also about this time there are signs that prices are stablising in the Commodity markets, also signs of demand coming back in the high end goods market(luxury items) as the rich start pulling their money out of hiding.....

...Expect a seies of recessions to occur during the period 2000-2014 similar to those experienced back in the last secular bear period of 1966-1982. Although times are difficult there is good trading opportunies for the fleet-footed investor as so of the biggest bull market gains happened here as well as bears....

Russell Napiers Crystal Ball what the world would see at the bottom of this latest Bear Market

(Remember interview was Dec2007)

People will be saying equities will be a bad investment
There will be fears of Bank Collaspes
There will be fears for the safety of holding money in a bank
There will be talk of falling prices
Inflation will be very low with possible deflation
Low global confidence in America
New skills have to be learn't to survive in a changed environment after the Bear
Year 2014 onwards when assets look attractive again PE ratio 10 or less in the equity markets. etc.

--------------------------------------------------------------------------------------------------------------------------

Quote from Art Collins Review of Anatomy of the Bear (http://findarticles.com/p/articles/mi_qa5282/is_20080401/ai_n25136961)

Napier's portrait touches everything from literature to the evolution of our consumer society. sections of the book convey information via Wall Street Journal excerpts. Their inclusion corrects one popular misconception about market bottoms, that they occur when sentiment is at its most negative. Entry after entry demonstrates that in all four timeframes, speculators were receiving straightforward confirmation that market strength was building.

Another challenged axiom is that bottoms are accompanied by high volume as longs capitulate. Actually, turnarounds are ushered in with low volume and malaise.
Several bottoming signals, some of which may surprise you, are presented. Probably the most telling is the extreme undervaluation of stocks as measured by the Tobin Q ratio, which is the market value of a company's assets divided by their replacement value. At these key buy-friendly times, stocks dip to about 30% of the startup value of the respective companies. Meanwhile, previously softening commodity prices begin to firm.



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Anatomy of the Bear (http://www.capitalideasonline.com/articles/index.php?id=1903)
Posted on 14th June 2006
by Chetan Parikh (http://www.capitalideasonline.com/articles/index.php?id=154)

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Anatomy of the Bear (http://www.amazon.co.uk/exec/obidos/ASIN/9628606794/203-3136684-8159164)


- Russell Napier



This insightful book based on painstaking research by Russell Napier uses financial history of over a hundred years to understand the anatomy of bear markets.

The author defines using the lessons of financial history: “If there is a legitimate role for the study of human judgment and decision making under uncertainty, then financial history is redeemed. What is financial history if not such a study? The behaviouralist school of psychology, around for nearly a century, is based on observing reactions to selected stimuli. Financial history looks at market prices, which are a reflection of the behavior of thousand of participants to certain stimuli. In behavioural economics, history is a useful tool for observing how financial markets work, rather than theorizing about how they should work.

Such historical studies have not yet lent themselves to the comforts of empiricism. This, in itself, may be enough of a reason for many to reject the approach. However, the inability to translate all understanding into binary code does not necessarily denude it of value and insight. If psychology is a soft science, then using financial history to assess human decision-making in times of uncertainty is softer still. For those who accept that human judgement and decision-making cannot be divided by equations, financial market history is a guide to understanding the future.”

Some of the conclusions that the author makes on studying the common characteristics of the great bear markets and the buying opportunities that they present are as follows:

“It is axiomatic to say equities are cheapest at the bottom of the market. One indicator of value available to investors at the time was the q ratio. It fell below 0.3x at all four bear market bottoms. The cyclically adjusted PE provides the next best contemporary indicator of value, but its range has been rather wide at the bottom - from 4.7x in 1932 to 11.7x in 1949. Even calculating cyclically adjusted PE using inflation* adjusted earnings, the range is still a wide 5.2x to 9.1x.

Equities become cheap slowly. On average, it took nine years for equities to move from peak q ratios to their lows. If one excludes the 1929-32 bear market, the average period for the adjustment in valuations was 14 years. The US equity market reached its highest-ever valuations in March 2000, and all extremes of valuation have been followed by this slow move to undervaluation.

With the exception of 1929-32, our bear markets occurred against a background of economic expansion. On average, real GDP expanded 52% over the course of our three long bear markets. Nominal GDP expanded by an average of 285%.

Reported corporate earnings growth, at least in real terms, is muted during our bears, but it too has a wide range. Inflation-adjusted earnings growth ranged from -67% to +28%. For nominal earnings in the four bear markets, the range is -67% to+ 119%.

A material disturbance to the general price level will be the catalyst to reduce equities to cheap levels. On three occasions - 1921, 1949 and 1982 *- the disturbance was a period of high inflation followed by deflation, although in 1982 deflation was confined to commodity prices. There was no initial inflation in 1932, but there was still a material disturbance to the general price level in the form of severe deflation. In such periods of price disturbance, there is great uncertainty as to both the level of future corporate earnings and the price of the key alternate low-risk asset *government bonds. This in turn leads to a decline in equity valuations.

We have seen that all four of our bear-market bottoms occurred during economic recession. We have also seen that a return of price stability, following a period of deflation, signals the bottom of the bear market in equities. In particular, stabilising commodity prices augur more general price stability ahead and signal the rebound in equity prices. Of all the commodities, the change in the trend of the price of copper has been a particularly accurate signal of better equity prices. In assessing whether price stability is sustainable, investors should look for low inventory levels, rising demand for products at lower prices, and whether producers have been selling below cost.

We have seen that a sell-off in government bonds accompanies at least part of the bear market in equities. Things were slightly different in 1929-*32, when bonds rallied from September 1929 to June 1931. Only then did a sell-off begin, lasting until January 1932. But even in the two bear markets associated with high levels of deflation - 1921 and 1932 - there was some sell-off in government bonds.

Tactical

Investors should look out for the key strategic factors when attempting to assess whether the move from overvalued to undervalued equities is nearing completion. When the strategic factors suggest this process may be coming to an end, there are a host of tactical considerations to be considered in attempting to find the bottom of the market. As we have seen, a recovery in government bond prices precedes a recovery of equities. In 1932, equity prices bottomed seven months after the government bond market. In 1921, 1949 and 1982, the lags were 14, nine and 11 months respectively. The price decline in the DJIA following the bottom of the bond market was 23% in 1921,46% in 1932, 14% in 1949 and 6% in 1982.

The birth of a new bull market for corporate bonds will precede the end of the bear market in equities. The recovery in corporate bond prices led equities by two months in 1921, one month in 1932 and five months in1982. In 1949 the lead was much larger - 15 or 17 months - depending on how one defines it, but this was probably due to the distortions to the bond markets in the post-war era.

In our three long bear markets, reductions in interest rates by the Federal Reserve preceded the bottom for equity prices. The lag before equity prices bottomed was three months for 1921 and 1949, and 11 months for 1982. On all three occasions, the decline in the DJIA over the period of the lag was less than 20%. It was a different story in 1929-32. The Fed cut rates in November 1929, while the bear market was still in its infancy.

A number of further tactical conclusions can be summed up briefly:

Economic and stock market recoveries roughly coincide. Recovery in the auto sector precedes recovery in the equity market.

Bear market bottoms are characterised by an increasing supply of good economic news being ignored by the market. While numerous bulls bang the drum for equities even at the bottom of the market, they will be ignored.

Many commentators will suggest the worsening fiscal position will prevent economic recovery or a bull market in equities. They will be wrong.

Decline in reported corporate earnings will continue well past the bottom of the market.

The bottom is preceded by a period in which the market declines on low volumes and rises on high volumes. The end of a bear market is characterised by a final slump of prices on low trading volumes. Confirmation that the bear trend is over will be rising volumes at the new higher levels after the first rebound in equity prices.

There will be a large number of individual investors shorting stocks at the bottom of the market. Short positions will reach high levels at the bottom of the equity market and will increase in the first few weeks of the new bull market.

Dow Theory works to signal a buy for equities.

These are the identifying features of the bear and its bottom. Just as the possession of fur does not, of itself, permit the identification of an animal as a bear, the possession of anyone of the features above should not be considered as constituting positive identification of its financial equivalent. Our list is the financial equivalent of Einstein's questions. In trying to identify the bear-market bottom you will have to find the answers to most, if not all, of the questions.”

A classic.”

-------------------------------------------------------------------------------------------------

Hoop
30-10-2008, 10:38 PM
* Commodities Count. The end of commodity price declines also marked all 4 major equity lows, with copper playing a prominent role as it preceded or coincided with every equity rebound. Russell Napier

Lizard
31-10-2008, 06:31 AM
Here's some more calcs on P/E ratios from one of the Minyanville team:
P/E Scenarios for a Volatile Time (http://www.minyanville.com/articles/index.php?a=19763)

Below is the main table from this article which is fairly self-explanatory:

http://image.minyanville.com/assets/FCK_Aug2007/File/Cory/catpe_big.jpg

I'm not completely convinced that the difference in earnings between "great times" and "terrible times - deflation" is only 35%.

Hoop
17-11-2008, 12:56 PM
Here's some more calcs on P/E ratios from one of the Minyanville team:
P/E Scenarios for a Volatile Time (http://www.minyanville.com/articles/index.php?a=19763)

Below is the main table from this article which is fairly self-explanatory:

http://image.minyanville.com/assets/FCK_Aug2007/File/Cory/catpe_big.jpg

I'm not completely convinced that the difference in earnings between "great times" and "terrible times - deflation" is only 35%.

Sometimes company earnings rise during terrible times (re: equity market)

Liz the figures in the table quoted by Minnyanville team seem to be similar to those by Crestmont Research see page 9 / of 12 (http://www.crestmontresearch.com/pdfs/Stock%20PE%20Report.pdf)(PDF) "The Latest Stock PE Report"

A recovery from both terrible times scenarios would see the death of the present secular bear phase (born 2001- ) and the birth of a new secular bull phase

Hoop
17-11-2008, 01:20 PM
* Commodities Count. The end of commodity price declines also marked all 4 major equity lows, with copper playing a prominent role as it preceded or coincided with every equity rebound. Russell Napier

Update from two weeks ago. The Spot Copper price is still downtrending but it is decelerating causing steep downtrend line breaks.

Hoop
06-12-2008, 10:16 AM
UPDATE

Although Copper is a very reliable bottom picking indicator..it is just one indicator of many.

Has the bottom been reached on the DOW?? ..copper says ..not yet determined.

Once Copper establishes a convincing uptrend then it is "safe" to call a bottom (90% safe)

Hoop
06-12-2008, 12:38 PM
Bottom pickers who guess it right are Heroes..until next time.
Asking a successful bottom picker how they did it and all you get is answers which appear with hindsight logical...e.g shares ridiculously cheap why were you not in?
Very seldom do you get a scientific answer based on analysis from previous endings of Bear market phases.


Below are some indicators some more reliable than others..but use them all together an investor can build confidence as to when to re-enter the market....When these indicators start lining up(all the ducks lining up in a row) then there is increasing probability that the bottom has been reached.

The most reliable of these indicators is Copper prices and DOW Theory ..analysis has shown that these indicators has so far never failed...other indicators have failed at least once.
I have written in red my view if this indicator has been triggered

1... Reversal trend (down to up) Spot Copper prices NO
2... Dow Theory in General May have
3... Equity price volatility at maximum around phase change (bull to bear /bear to bull) Yes
4... Commodity price / Equity inverse correlation disconnect signals start of Bear Market (3) final capitulation phase Yes
5... TA ....short uptrend off bottom Yes... but could be another (bear market rally) sucker rally
6... TA .... Most Globial Equity indices reaching clusters of long term support lines Yes
7... History Statistics: A crash in October bottoms in October Not true this time on some exchanges.
8... Commodity prices bottoms out at similar time to Equities. Not occurred yet
9... History: Equity markets bottom out halfway (58%) trough an economic recession If this indicator holds true this recession is going to be historically one of the longest recessions. Note NZ first to enter a technical recession is the first to end (Bollard announcement 4th Dec) ..indicator failed?
10... History: Govt and other system (Reserve Bank/Fed/rich individuals) intervene (nationalise) 2/3rds of the way down of the final C wave (capulation) before bottom Yes
11...A V shaped low volume rise off bottom ..followed by volatility and testing the bottom again...followed by lower volumes (Note DOW and S&P research) Also DOW Theory May have
12...US$ trend reversal aids Commodity/Equity recovery No
13...Falling index PE Ratio to below 10 and forward PE falling (not necessarly to below 10) Yes
14... FA showing well below valued recession proofed stocks with good income/profit /cash in bank flows Yes
15... Investors psychology Doom and Gloom with no hope (DOW Theory) yes to Doom and Gloom No to no hope ..although increase in no hope candiates (e.g can see only a flat index figure for future years)
16... Loss of appetite in all downward spiralling instruments e.g Short selling etc Mainly No..however many shortsellers been burn't lately so maybe yes in the near future
17...Fibonacci: 50% index retrenchment from previous Bull market high (historical average 40%) yes to most exchanges
18...Fibonacci Ratios wave C (capulation wave) equal to Wave A or 1.62 x Wave A or 2.62 x Wave A Yes
19... DOW Theory Bottom forming pyscology...a change of attitude from lets buy these very cheap shares to why buy at all Not yet
20...Credit interest very low tempts investors back to better returns property and Equities Not yet interest rates still falling.
21...Increase in secured Bonds activity Yes in NZ, don't know elsewhere
22... Freeing up of frozen monies, making money more available, usually through reserve bank (FED) intervention/Govt taxes etc Yes
23 Q-Ratio drops below 0.3 ..when a company value is less than 1/3 of it's start up value T/O activity helps equity recovery. Increased T/O activity. Yes to T/O activity (forced or otherwise). Q Ratio hard to assess Q-values to an index.

Conclusion

Probably many other indicators I have missed (Other posters may wish to add them) but as it stands there are 12 yes' 7 No's and 4 maybes.

The two most reliable indicators show a No and a maybe, which indicates the worst may not be over as of today.

As most of the ducks have not yet lined up you would have to be a betting man to call this the bottom...however a lot of triggered signs are out there..and this must point towards a favourable outcome. Maybe next week or next month more indicators may trigger.
Hoop personally thinks Copper is the Key indicator to watch.

Footsie
09-12-2008, 08:01 AM
Hoop


Of all the historical bottoms, none are formed over a 2 month period (thats not to say it cant happen this time). ie Oct-Nov 08


After big sell-off's when you look back at history on the monthly charts they all look like "V's"
But if yuo drill down, all bottoms are formed by a 4-9 month process of bouncing around the base. Sometimes with massive fake rallies.

IF this is to be a bottom then the outcome should be as follows
A bounce from here to say 1,000 on the SP.... then a retrace back down to say 750-800 1st Qtr 09...
Then a rally out 2nd Qtr 09.

I would be very surprised if this was it, and we just V our from here....


Q ratio is still at 0.65x on the SP
Copper has not bottomed
Auto Sales are still falling off a cliff
No positive signs anywhere in the economy
Still massive bankruptices to come in the retail sector in Feb/March 09

Still history can always be made, but i firmly believe you will get another chance to buy at the previous lows in the next 6 months and hopefully by that stage there a few more positive signs


Note also that the DOw always bottoms in the month when non-fram payrolls peak for the recession. Some may argue a figure of 533k is the peak loss. But i'd say post xmas lossess could easily top 1m.
problem is we cant pick when the peak job loss figure is until after the date.. yuo just have to go with yuor gut.... and my gut says that there will be massive job cuts in retail post xmas.

Obama's big infastructure plan is all well and good but the rubber wont hit the road there till late 09........precisely when i think we could be pulling out of this.

PS to achieve a Q ratio of 0.3x we need to hit 500 on SP.

Mick100
10-12-2008, 01:47 PM
Another book well worth a read is:

Tomorrows Gold - By Marc Faber

Faber is a student of economic history
The book covers a lot of theory on business cycles and long waves (kondratieff waves)

Written in 02-03
His predictions of what lay ahead at that time are surprisingly accurate

Much easier reading than Russell Napier's book
,

Aussie
10-12-2008, 02:05 PM
Another book well worth a read is:

Tomorrows Gold - By Marc Faber

Faber is a student of economic history

I've seen him on CNBC a lot of what he says makes perfect sense to me . . . especially his criticism of the US Fed and it's dreadful economic policy. Definitely worth an easy search on YouTube.

Regarding the USA, to a large extent what happens there . . . happens everywhere.

Hoop
12-12-2008, 08:56 AM
Another book well worth a read is:

Tomorrows Gold - By Marc Faber

Faber is a student of economic history
The book covers a lot of theory on business cycles and long waves (kondratieff waves)

Written in 02-03
His predictions of what lay ahead at that time are surprisingly accurate

Much easier reading than Russell Napier's book
,

Hi Mick
thxs, must have a look..sounds like a must read.

Hoop
12-12-2008, 10:30 AM
Even though the DOW could not crack the 8950 resistance level, the lowest of many resistance levels within the 9550 -10000 band ...and as I post it has fallen 200 points back to high 8500's there has been some significant happenings today which is a plus for Equities.

More indicators are signaling a bear market bottom since I last posted #149 6dec2008
12...US$ trend reversal aids Commodity/Equity recovery No
change from NO to a maybe.
20...Credit interest very low tempts investors back to better returns property and Equities Not yet interest rates still falling.
some commentators are suggesting this scenerio .Even though the action is low the thought is growing.
21...Increase in secured Bonds activity Yes in NZ, don't know elsewhere
now changed to Yes

Spot copper prices is again today showing a decelerating downtrend pattern but is too early to say if prices has bottomed out

Conclusion: some more indicators is signaling that a bottom has been reached.

More commentators are cautiously thinking a bottom may have been reached including the old well known and respected Richard Russell (see below)






http://i.mktw.net/newsimages/news/dreds/columnist/brimelow_67x67.gif
PETER BRIMELOW
Is it over?

Commentary: Signs suggest we may have seen worst of bear market



By Peter Brimelow (http://www.marketwatch.com/news/mailto.asp?x=112+98+114+105+109+101+108+111+119&y=Peter+Brimelow&z=marketwatch.com&guid=%7B93dfa91c-801f-42e9-ba92-80d2d427d1da%7D&siteid=mktw), MarketWatch
Last update: 12:58 a.m. EST Dec. 11, 2008
http://i.mktw.net/mw3/community/images/btns/icons/site/comments.pngComments: 341 (http://www.marketwatch.com/news/story/Is-bear-market-over/story.aspx?guid=%7B93DFA91C%2D801F%2D42E9%2DBA92%2 D80D2D427D1DA%7D#comments)


NEW YORK (MarketWatch) -- Gold up a lot, stocks up a little, bonds blah. Is it over, at least for now?

Dow Theory Letters' Richard Russell thinks it might be. He writes: "We may now be hitting the inflection point that I've been talking about. The selling of stocks could be exhausted, the deflation may be on the edge of turning into inflation -- today bonds were down, dollar was down, gold up strongly. The Bernanke-Paulson "re-inflation" efforts may finally have halted the fear and deflation syndrome -- now the trillions of dollars that have been introduced into the system may be close to setting off inflation. I said that the first hint of the change would be rising gold and declining bonds. We may be there."
At least for now, that is. Russell adds suspiciously: "Great bear markets tend to produce great contra-trend bear rallies. And I'm wondering whether the market isn't preparing for a major (false) bear market rally now. Please study the daily chart of the Dow Jones Industrial Average. ($INDU (http://www.marketwatch.com/quotes//$indu):Dow Jones Industrial Average
News (http://www.marketwatch.com/tools/quotes/news.asp?symb=$INDU), chart (http://www.marketwatch.com/tools/quotes/intchart.asp?symb=$INDU), profile (http://www.marketwatch.com/tools/quotes/profile.asp?symb=$INDU), more (http://www.marketwatch.com/quotes//$indu)
Last: 8,761.42+70.09+0.81%
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<img class="pixelTracking" width="1" border="0" height="1">$INDU (http://www.marketwatch.com/tools/quotes/quotes.asp?symb=$INDU) 8,761.42, +70.09, +0.8%) Do you see the pattern of a head-and-shoulders bottom? If the Dow rallies above 9,000, the picture will begin to look bullish. And the current bearish sentiment will begin to change. The Transports are also in position to confirm any Dow breakout -- Transports have formed a potentially strong ascending triangle."
Russell has a strong long-term timing record according to the Hulbert Financial Digest. But in a tragedy worthy of Greek drama (I love writing about the investment letter business!) this octogenarian long-time superbear was finally enticed into bullishness last year, right at the top. See Sept. 19 column (http://www.marketwatch.com/News/Story/russells-bad-year-gets-worse/story.aspx?guid=%7BCE7AFBE1%2DB79C%2D4C99%2DBA60%2 D05E952A01EBA%7D)
As a result, his instincts are now even more afire.
Perhaps significantly, Russell's instincts are seconded, in a very short-term way, by Dennis Slothower, whose 2008 money-maker, Stealth Stocks Daily Alert, comments I am auditioning as a replacement for Russell's ... should the master decide to retire. See Dec. 4 column (http://www.marketwatch.com/News/Story/theres-something-about-slothower/story.aspx?guid=%7BDE5154FE%2DFBD6%2D4B50%2D8DB3%2 D06D7A3E97D28%7D)
Slothower wrote Wednesday night: "Stocks managed a moderate gain after a back-and-forth session that saw investors snapping up energy and materials stocks and dumping financial shares. It was interesting to see what led the stock market, as commodity stocks (such as energy and gold) rebounded a bit, giving the stock market a boost today.
"This focuses us back to the US dollar, which saw selling pressure. The U.S. dollar appears to have formed a head-and-shoulder formation, suggesting a correction in the dollar has begun.
"The implication of this suggests a rebound in the commodity stocks, which isn't too surprising given that OPEC meets next week and will likely cut oil production about 2 million barrels a day, according to the most likely scenario.
"A rebound in commodities would be bullish for the stock market on a near-term basis, as energy is a big weight in the indexes.
"Frankly, I am growing more optimistic with the market challenging its 50-day moving average but the indexes have to get past this technical barrier before investors take the bulls seriously, i.e., that they can do more than hold the market up for a few days ... I like what I am seeing but we aren't there yet."
This fits in with the Aden Forecast, among the most thoughtful letters. See Nov. 14 column (http://www.marketwatch.com/News/Story/aden-sisters-still-jumpy/story.aspx?guid=%7B458AB987%2D23B1%2D48F9%2DA88E%2 D85DA03315606%7D)
In their issue that arrived Wednesday, Mary Anne and Pamela Aden write: "We do not recommend selling now. Keep your resource and energy stocks in order to sell at a better price, assuming the stock market stays bearish. If it turns bullish, then we'll keep our stocks and/or adjust our positions. Watch the Dow Industrials ... it'll be positive above 8,900 but if it rises above 9,000 and then 9,600, the rebound rise will clearly be underway." http://i.mktw.net/mw3/News/greendot.gif

Footsie
12-12-2008, 01:12 PM
Hoop
Richard russell is a nutter

He's one of these guys who calls the bear or the bull until he is eventually right...the all of a sudden he is a guru

Russell also said stocks were a buy in Jan 08!!!


I refuse to rely on others who are "guru's"
This time i will make my own judgement and deal with the consequences.

I still believe we will retest the lows in 2009.

Hoop
12-12-2008, 09:46 PM
Hoop
Richard russell is a nutter

He's one of these guys who calls the bear or the bull until he is eventually right...the all of a sudden he is a guru

Russell also said stocks were a buy in Jan 08!!!


I refuse to rely on others who are "guru's"
This time i will make my own judgement and deal with the consequences.

I still believe we will retest the lows in 2009.

Russell also said stocks were a buy in Jan 08!!! So did most people on ST only a very small minority me included believed we were in a Bear Market at that time.

Russell also said in May 2007 that the DOW was in a Bull market... he was late coming to the party on that statement wasn't he? :D .

We all get it wrong at times but his success over a 20 year period between 1960-1980"s is legendary

OK hes in his 80's now and probably lost a few marbles due to age, but the man is still highly respected.

Footsie like you I don't rely on Gurus, however I feed on all information and sieve out what i believe is good for me and make my judgements to suit my own personal style and personality...so everyone is different. I've had a year in the black up until today by adopting bear market strategies. I thought HBY was a good investment, others didn't and the others were right!:p. We all misinterpret info at some stage..a part of being human I guess. Now my portfolio including cash is slightly in the red for this year with a red face to go with it :o because armed with hindslight HBY looks lousey so what was I thinking.

Overall its usually a brain trust type of operation..the more brains put to a certain task the more accurate the result and an improved outcome..works in theory of course;)

Hoop
13-12-2008, 10:05 AM
Update on the spot copper prices

From history, Copper has been a very reliable bottom picking indicator for Equities.

Copper prices still downtrending but the trend has again decelerated this week.

Mick100
13-12-2008, 12:54 PM
Hoop, Napier states that copper prices will stabilize and begin to increase from record low inventories. Unfortunately copper inventories have been increasing in recent months. So, IMO, copper is no where near indicating a bottom yet

I read recently that the supply chain for base metals is approx 4 months long - ie, it takes 4 months from when the metal is mined before it reaches the end buyer's (user's) wharehouse. Some big copper mines have been scaled back or closed in the past month in south america
In theory it will take another 3-4 months for these closures to affect inventories.

I don't expect copper to go below $1.25, so price may not go much lower but inventories need to fall and copper prices increase before we can say that copper is giving a "sharemarket bottom signal"


======================================

http://www.kitconet.com/charts/metals/base/spot-copper-6m.gif (http://www.kitcometals.com/charts/copper_historical_large.html#6months) http://www.kitconet.com/charts/metals/base/spot-copper-1y.gif (http://www.kitcometals.com/charts/copper_historical_large.html#1year) http://www.kitconet.com/charts/metals/base/spot-copper-5y.gif (http://www.kitcometals.com/charts/copper_historical_large.html#5years)
http://www.kitcometals.com/images/releases/arrow.gifCopper Historical Charts - NYMEX Stocks http://www.kitcometals.com/images/line_horiz.jpg
http://www.kitconet.com/charts/metals/base/nymex-warehouse-copper-30d.gif (http://www.kitcometals.com/charts/copper_historical_large.html#nymexstocks_30days) http://www.kitconet.com/charts/metals/base/nymex-warehouse-copper-60d.gif (http://www.kitcometals.com/charts/copper_historical_large.html#nymexstocks_60days)
http://www.kitcometals.com/images/releases/arrow.gifCopper Historical Charts - LME Stocks http://www.kitcometals.com/images/line_horiz.jpg
http://www.kitconet.com/charts/metals/base/lme-warehouse-copper-30d.gif (http://www.kitcometals.com/charts/copper_historical_large.html#lmestocks_30days) http://www.kitconet.com/charts/metals/base/lme-warehouse-copper-60d.gif (http://www.kitcometals.com/charts/copper_historical_large.html#lmestocks_60days) http://www.kitconet.com/charts/metals/base/lme-warehouse-copper-6m.gif (http://www.kitcometals.com/charts/copper_historical_large.html#lmestocks_6months) http://www.kitconet.com/charts/metals/base/lme-warehouse-copper-1y.gif (http://www.kitcometals.com/charts/copper_historical_large.html#lmestocks_1year) http://www.kitconet.com/charts/metals/base/lme-warehouse-copper-5y.gif (http://www.kitcometals.com/charts/copper_historical_large.html#lmestocks_5years)
Spot quotes are non-LME priceshttp://www.kitcometals.com/images/line_horiz.jpghttp://www.kitcometals.com/images/line.jpghttp://www.kitcometals.com/images/trans.gif

winner69
16-12-2008, 11:46 AM
Hoop .... you don't reallt want to read this, esp the latter half where S&P earnings are forecast to be $40 which means the S&P500 could go anywhere

http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2008/12/15/semi-annual-u-s-economic-outlook-collapsing-on-schedule.aspx



P/Es and Stock Prices

Our forecasts imply S&P 500 operating earnings of $40 per share in 2009, down 35% from our $62 estimate for this year. That may sound extreme, but not for the most severe worldwide financial crisis and deepest global recession since the 1930s. At stock market bottoms, the S&P 500 P/E tends to be in the 10-12 range. But low interest rates normally push up P/Es and 10-year Treasury now yield 2.66%, and will probably be even lower later while 30-year Treasury bonds are now at 3.0%, our long-held target, and also a low in recent decades, but may drop further.

So a P/E of 15 at the stock bottom sounds reasonable, but would put the S&P 500 index at 600 then, down 32% from here and 61% below its record close on Oct. 9, 2007. Wow! Earlier, we warned of the number 777, not the Boeing airliner model but the low on the S&P 500 in 2002. If it were breached, we noted, then the bear market that started in early 2000 would still be intact, and all of the rally from the 777 low in October 2002 to the peak five years later would merely be a rally in a bear market. Last month, the S&P 500 fell below 777. It has since bounced, but probably not for long as new lows lie ahead.

There are other reasons to expect considerable further weakness in stocks. High dividends can support stocks at least to a degree, and dividend yields in Europe are meaningful, averaging 5.2%. But not in the U.S. where the S&P 500 yield is a miserly 2.5%. And dividend cuts are coming fast and furious. In the U.K., dividends are constrained for financial institutions getting government bailouts, while in the U.S., the financial sector is slashing dividends.

Some 36 of the S&P 500 have cut dividends 46 times this year, axing $33.8 billion, with $30.8 billion coming from financials. Among those S&P 500 firms, about 20% of dividends this year are from financials, down from 34% in 2007. Elsewhere, REITs are cutting payouts, and GM eliminated its dividend. Only 202 S&P 500 companies have initiated or raised dividends 218 times this year, representing payments of $18 billion, with only $2.4 billion being from financials. In 2007, 298 did so and only 12 reduced or suspended dividend payments.

In troubled times, investors tend to withdraw from foreign markets to concentrate on the home scene they know best. That's why bear markets tend to be uniform. U.S. investors sold a net $92 billion in foreign stocks and bonds in the July-September period, a record flight from overseas investments, while foreign investors pulled over $100 billion from stocks in Japan, South Korea and India so far this year. U.S. stocks are actually falling less than most foreign markets.

Hoop
17-12-2008, 01:10 AM
Hi Winner

Confusing times we are in... click on any well respected site and you get all sorts of answers and prophesies.
Even my Zurich Axioms chart pinned on my wall says beware of history.

It was said that nothing works at the bottom of a bear market cycle, and it results in frustration...how very true that statement is.

However it seems from History that bear market cycles follow a pattern and this 2008 bear is no different...all the old economic theories still work (that is why they are called theories) and all the signals associated with past observations have also worked with past bears...What is different about this this bear ...nothing!...therefore if people stick to the theories and signals associated with the bear market event and act accordingly they will be better off than following the herd down an emotional maze of ifs and buts.

Winner I may come across as being an optimist at the moment (remember I was labeled a pessimist a year ago :) ) but I'm neither really.. I'm a realist, trying very hard to dissociate myself away from commentator emotional noise so not to bias myself by being emotional and become torn apart with doubt & confusion due to opposing scenarios that all have plausable explainations but only one has the opportunity of happening.

To be an individualist at the moment, be alert... watch for signals and apply my knowledge and theories that I have learn't over the years is much more constructive to me in my decision-making. I do acknowledge all I read and hear so not to have my head buried in the sand but as all the different opposing scenarios and arguments seem equally logical.. I must therefore take the view that it is all illogical :) and all must be doubted because every scenario can not be correct at the same time. Something along the lines of lies ..damned lies ..and statistics.

Winner... sure.. there is a chance that we are still in the grips of a bear market and another c wave (capitulation) is heading our way, but I think there is an equal chance that we are already in phase 1 of a Bull market which will see the bottom tested or new bottoms marginally lower than now created over the next 6 months or so.


That reminds me ...At varsity (when dinosaurs still ruled the earth :)) Stage 1 economics, we learnt the basic simple theories and applied them.

Remember that Economic Clock.


What time is it now? 7 O'clock ??? if it is, the clock told you that you should've at 6.30 had increased your share allocation and reduce cash

Have a look at 8 o'clock :)


http://www.wealthtipsonline.com.au/icgrfx/econclock.gif


Many people say the economic clock doesn't work...a criticism which happens when people tend to over-complicate things.
Economic clock is simplistic and works off simple theories and gives only a basic understanding of the economic cycle which most people tend to forget about in times of panic and stress.

To understand the clock remember that the time on this clock is not a constant...so it is possible for time for example from 1 oclock to 5 oclock to go very slowly and 6 oclock to 12 oclock time to spin around very fast and go from end of recession back to slump very quickly...the pessimistic group of the well respected are assuming this.

Often market intervention buggers up the economic clock such as engineered high interest rates which seizes the clock at "half past 12" causing both chronic rising property values and an extended equity bull market together.

Also remember the clock only spins one way.. clockwise

I think.. market intervention by the Global Powers at the moment to free up the tight money supply (frozen/stuck are better words) will make sure that this clock will not stall at 5 to 6 o'clock area..hence my belief that odds on chance the Equity bear market is ending or ended but we are still to experience the painful part of the recession (or no growth event) with an uneven hestant recovery.


Interesting article Winner (didn't mind reading it at all, rather enlightening in fact).. re: S&P earnings dip and lower dividends (expected though)...however assuming share price drop resulting from those events may not happen of course..especially if interest rates fall faster than stock yields....but as you said the S&P could go anywhere.:)

Footsie
17-12-2008, 08:47 AM
Hoop

Don't try and be a hero and go for the exact bottom.

None of Russell Napiers indicator's a flagging a buy yet and Charts definitely are signalling a LT buy. So just be patient.

You've done so well staying out this year, wont hurt to wait for confirmation of a bottom (in case it doesnt occur)

IMHO the investment clock is just after 3pm... Commodities have just collapsed. Oil is still falling.

Don't go for the top of the bottom, just try and capture the "fat", the 80% in the middle.

PS last yr you were using charts to indicate the top,.... so tell me what are your charts telling you now? I bet the say wait

duncan macgregor
21-12-2008, 08:14 AM
I have found that the one and only thing to worry about in this investing world is your level of common sense. Without that you are nothing. The market is manipulated by greed and fear where fundamentals count for less than nothing.
You cant read books to find common sense, you either have it or you dont. My rules for investing in the market are very simple.
If in doubt get out. Always have a stop loss. Never buy a downtrending share. Always check the commodoty price chart first, the company comes second. Only invest in a rising sector. Never pick bottoms you only get covered in crap. Keep your finger hovering over the sell button in over the top steep uptrends.
Dont waste your time worrying about the rights or wrongs in company business, they are only there to make you money. The companies to avoid are the companies with the highest debt levels, they get hit the hardest in downturns.
I have been out the market this year and fully expect to be out in 2009 this market is not a place that i want to be in right now. I expect next year to really get bad with the whole world economy reduced to tatters. Material things that hold their material value is what to buy, money after all is only a bit of paper with promise to pay stampted on it. Macdunk

Mick100
21-12-2008, 06:46 PM
Your a bloody legend macdunk

This sharetrader forum wouldn't be the same without your input

Merry christmas

Aussie
24-12-2008, 11:59 PM
. . . I expect next year to really get bad with the whole world economy reduced to tatters. Material things that hold their material value is what to buy, money after all is only a bit of paper with promise to pay stampted on it. Macdunk

Ain't that the truth . . . some good advice there.

I'm a just a "johnny come lately" . . . but I think 2009 will be a huge year for the precious metals complex. :D

Hoop
26-12-2008, 12:03 PM
UpDate
No need to draw trendlines. the chartlines speak for themselves.
Relying on these indicators the equity bear lives on


Mick100quote.. Hoop, Napier states that copper prices will stabilize and begin to increase from record low inventories. Unfortunately copper inventories have been increasing in recent months. So, IMO, copper is no where near indicating a bottom yet

Hoop
28-12-2008, 10:03 AM
Footsie Quote PS last yr you were using charts to indicate the top,.... so tell me what are your charts telling you now? I bet the say wait.

Could also be saying short term opportunity to play into another possible (sucker?) rally perhaps.. Indicators showing a possible rally creation in progress.

No long term sign of a trend change..still wavering down in its downtrend channel.

winner69
11-01-2009, 09:50 AM
Latest estimation for the 2008 earnings for the S&P500is about $48 ,,, which puts the S&P500 currently at at a PE of nearly 19 on estimated past earnings

Projected 2009 earnings are $42 ..... so the S&P500 on a PE of 21 forward earnings (and earnings estimates are notoriously optimisitic)

Hardly the territory for the end (bottom) of a secular bear market is it. even though this is the S&P500 one still needs to assume that generally the situation is much the same in this part of the world (ANZ) .... so we should expect any decent long term returns from the market either.

As said early on in this thread it does come down to stock selection and managing the downsides, ie strict stop losses.

However as Hoop has pointed out several times there are bull rallies in a secular bear market.

The ANZ market are looking a little more positive. On weekly closes the ASX200 is up nearly 10% from a low (weekly) on Nov 21st ... and the chart is pointing to a confirmed uptrend ... esp if we can get a weekly close above 3582 and not any disasterous weeks to put us back to square one again

as Kenny Rogers said in The Gambler -

You got to know when to hold 'em
know when to fold 'em
Know when to walk away
and know when to run.

You never count your money
when you're sittin' at the table.

There'll be time enough for countin'
when the dealings done

This quote was the basis of an argument in this article 'Setting the Bull Trap"
http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2009/01/07/setting-the-bull-trap.aspx

Hoop
19-01-2009, 09:52 AM
* Commodities Count. The end of commodity price declines also marked all 4 major equity lows, with copper playing a prominent role as it preceded or coincided with every equity rebound. Russell Napier



I don't expect copper to go below $1.25, so price may not go much lower but inventories need to fall and copper prices increase before we can say that copper is giving a "sharemarket bottom signal". Mick100




It seems spot copper may be trying to find a bottom..short term uptrend not confirmed yet and Warehouse stock levels are still rising...so all bets are still off.


This is tentatively encouraging news for Global Equity markets (touch wood), but time is needed to confirm.


http://i458.photobucket.com/albums/qq306/Hoop_1/lme-warehouse-copper-5y-16012008.gif

http://i458.photobucket.com/albums/qq306/Hoop_1/spot-copper-60d-16012008.gif

Mick100
19-01-2009, 02:41 PM
http://www.kitco.com/ind/Dorsch/images/jan082009_7.jpg
The Chinese Purchasing Manager’s Index (PMI), which measures the activity of major Chinese companies, plunged to a record low of 40.9 in November. But there were glimmers of optimism hidden in the December report, with the new orders index for Chinese exports picking-up to 37.3 from 32.3 the previous month, and the sub-index for output climbing to 39.4 in December from 35.5 in November.

mick comment
extremely low chinese inventories could quickly bring down LME inventories.If there is a drop off in supply (to be expected in 2-3 months time) and increased chinese purchases then LME inventories should fall steeply - I still think that it will be another 6 months before we see a sustainable rise in copper

Mick100
25-01-2009, 01:15 PM
How's the dow theory looking Hoop, ie, transports

winner69
25-01-2009, 01:23 PM
How's the dow theory looking Hoop, ie, transports

A chart of the DJT popped up yesterday on CNBC .... looked rather sad over recent days/weeks ..... suppose Dow theory says that is not a good sign or is it a good sign if both the DOW and DJT hit the bottom together

Mick100
25-01-2009, 02:10 PM
A chart of the DJT popped up yesterday on CNBC .... looked rather sad over recent days/weeks ..... suppose Dow theory says that is not a good sign or is it a good sign if both the DOW and DJT hit the bottom together


Looking for a positive divergence in the transports winner - does'nt sound as though there will be one - still I like to see what dow theory is looking like.
,

Mick100
25-01-2009, 02:42 PM
I found this on the net

Have transports put in a new low or not - looks like, on a closing basis they might have

http://www.smallinvestors.com/SP500/DJIA37-1.gif
http://www.smallinvestors.com/SP500/DJIA37-4.gif
http://www.smallinvestors.com/SP500/DJIA37-2.gif
http://www.smallinvestors.com/SP500/DJIA37-3.gif

Kookaburra
05-02-2009, 10:14 AM
You might be right. On an Elliott wave count I cant really clearly see the 4th and 5th waves of the C wave down and would want to wait a little. It is a very impressive graph though as, to my way of seeing it, it counts very well until that point.

Mick100
08-02-2009, 10:56 AM
DOW theory update by Tim Wood

http://www.financialsense.com/Market/wrapup.htm

,

Hoop
10-02-2009, 09:17 AM
How's the dow theory looking Hoop, ie, transports



Personally.. I start watching the DOW transports closely when I start thinking the DJI is close to the end of the Bull Market phase cycle...Its been one of many "reliable" indicators at this stage of the cycle, as noticed by DOW theory watchers. For the rest of the time (bear cycles and Bull market (1st phase) there are many better indicators out there, therefore I take much less interest in the transports.

With reference to using indicators .....it all in the timing.

Hoop
10-02-2009, 10:32 AM
Writing about indicators..reminds me.

Update of my post #149 (6th Dec 2008)



Bottom pickers who guess it right are Heroes..until next time when they risk being zeroes.
Asking a successful bottom picker how they did it and all you get is answers which appear with hindsight logical...e.g shares ridiculously cheap so why were you not in?
Very seldom do you get a scientific answer based on analysis from previous endings of Bear market phases.


Below are some indicators some more reliable than others..but use them all together an investor can build confidence as to when to re-enter the market....When these indicators start lining up(all the ducks lining up in a row) then there is increasing probability that the bottom has been reached.

The most reliable of these indicators is Copper prices and DOW Theory ..analysis has shown that these indicators has so far never failed...other indicators have failed at least once. (the copper indicator may be triggered now 9th Feb 2009)

I have written in red my view if this indicator has been triggered (as of 6th Dec 2008)

Update 10th Feb 2009 written in green my view if this indicator has been triggered

1... Reversal trend (down to up) Spot Copper prices NO Maybe (yes) see chart below
2... Dow Theory in General May have Yes
3... Equity price volatility at maximum around phase change (bull to bear /bear to bull) Yes Yes and a noticeable less volatility now. A sign indicating a new market cycle in progress (Bull market (1)???)
4... Commodity price / Equity inverse correlation disconnect signals start of Bear Market (3) final capitulation phase Yes Yes we've had that...but it's not uncommon to have another one
5... TA ....short uptrend off bottom Yes... but could be another (bear market rally) sucker rally Yes and further on this phase we are now seeing the L shape with the first minor retest of the bear bottom just concluded ..a classic Bull market (1) type behaviour
6... TA .... Most Globial Equity indices reaching clusters of long term support lines Yes Yes
7... History Statistics: A crash in October bottoms in October Not true this time on some exchanges. No...November 2008?? October 2009??
8... Commodity prices bottoms out at similar time to Equities. Not occurred yet Maybe... some appeared to have bottomed
9... History: Equity markets bottom out halfway (58%) trough an economic recession If this indicator holds true this recession is going to be historically one of the longest recessions. Note NZ first to enter a technical recession is the first to end (Bollard announcement 4th Dec) ..indicator failed? NZ quarerly result aberration? Recession to last until Sept/Oct 2009? (Last half is the painful half)
10... History: Govt and other system (Reserve Bank/Fed/rich individuals) intervene (nationalise) 2/3rds of the way down of the final C wave (capulation) before bottom Yes Yes
11...A V shaped low volume rise off bottom ..followed by volatility and testing the bottom again...followed by lower volumes (Note DOW and S&P research) Also DOW Theory May have Yes and volatility is now lessening
12...US$ trend reversal aids Commodity/Equity recovery No No
13...Falling index PE Ratio to below 10 and forward PE falling (not necessarly to below 10) Yes ??? (maybe) changed... as the recession has deepened end of result season will tell
14... FA showing well below valued recession proofed stocks with good income/profit /cash in bank flows Yes Yes
15... Investors psychology Doom and Gloom with no hope (DOW Theory) yes to Doom and Gloom No to no hope ..although increase in no hope candiates (e.g can see only a flat index figure for future years).
Yes ..Many have now left the equity market for safer havens
16... Loss of appetite in all downward spiraling instruments e.g Short selling etc Mainly No..however many shortsellers been burn't lately so maybe yes in the near future Yes
17...Fibonacci: 50% index retrenchment from previous Bull market high (historical average 40%) yes to most exchanges Yes...no change
18...Fibonacci Ratios wave C (capulation wave) equal to Wave A or 1.62 x Wave A or 2.62 x Wave A Yes Yes
19... DOW Theory Bottom forming psychology...a change of attitude from lets buy these very cheap shares to why buy at all Not yet Yes
20...Credit interest very low tempts investors back to better returns property and Equities Not yet interest rates still falling. Maybe..There is talk as interest rates very low (historic lows)
21...Increase in secured Bonds activity Yes in NZ, don't know elsewhere Yes
22... Freeing up of frozen monies, making money more available, usually through reserve bank (FED) intervention/Govt taxes etc Yes Yes
23 Q-Ratio drops below 0.3 ..when a company value is less than 1/3 of it's start up value T/O activity helps equity recovery. Increased T/O activity. Yes to T/O activity (forced or otherwise). Q Ratio hard to assess Q-values to an index. Yes..Ditto

Conclusion

Probably many other indicators I have missed (Other posters may wish to add them) but as it stands there are 12 yes' 7 No's and 4 maybes.
The update shows 15 yes' 2 No's and 4 maybes

The two most reliable indicators show a No and a maybe, which indicates the worst may not be over as of today.
Update...The two most reliable indicators now show a yes and a maybe (yes)

As most of the ducks have not yet lined up you would have to be a betting man to call this the bottom...however a lot of triggered signs are out there..and this must point towards a favourable outcome. Maybe next week or next month more indicators may trigger.

Yes more indicators have triggered. With most of the indicators now triggered (most of the ducks have lined up in a row) it is more possible (than 6th Dec 2008) that the bottom has been found and the market is now in the process of retesting this bottom, this is a signature of a Bull market (1) phase. If a much lower bottom is not found during this process (continued Bear market (3) ) a substained rally will begin . Although this may seem like positive news, this present market phase is very dangerous..many high profile company collapses happen in this phase.

Hoop personally thinks Copper is the Key indicator to watch.

Copper market is looking positive but not entirely convincing yet...so caution is still needed in accessing the Equity market bottom using indicators

Disc: - cash 50% Equities 50% (still using bear market strategy)

Footsie
10-02-2009, 11:19 AM
Hoop
While i respect your anaylsis i wonder if you have answered yes in some cases when in fact the answer is not clear?

eg There is nothing in TA to suggest a bottom has been reached

Dusty
10-02-2009, 12:15 PM
Double top Vix around Nov/Dec and downtrending since, indicating fear in market may be subsiding.
http://finance.yahoo.com/q/ta?s=%5EVIX

Big job cuts slowing or ceasing to occur may be just as pivotal for restoring confidence in the markets (Nissan just anounced its cutting 20,000 and anglo-platinum 10,000)

Any sectors showing absolute or relative strength can be seen as a bottoming sign, transportation, tecnology, or maybe even financial sectors this time, they got us into this mess so maybe they will lead the way out.

Hoop
10-02-2009, 08:41 PM
Hoop
While i respect your anaylsis i wonder if you have answered yes in some cases when in fact the answer is not clear?

eg There is nothing in TA to suggest a bottom has been reached

...i wonder if you have answered yes in some cases when in fact the answer is not clear?...
Footsie,
I try to think/analyse unemotionally, but with the state of the economy there may be personal biases that I'm unaware of. I try to be as accurate as possible.

Using these historic indicators is a different method to try and pinpoint at what stage of the cycle the Equity Markets are situated. With this Global financial mess combined with media noise it is very hard to access the situation accurately...using historic indicators and applying them to the "now" is only one of many methods an investor could use.

eg There is nothing in TA to suggest a bottom has been reached..
Hmmmm... exactly ...may not be bottom, but may be bottom....who knows at this early stage. No-one can predict the future accurately....Even the absolute best future predicting indicator in theory (if one could ever be found) would still come unglued with a "black swan" happening.
TA will only tell you a bottom has occurred well after that event has happened as would commonsense....therefore one should employ other indicators or group of indicators for assistance.

Footsie
11-02-2009, 11:49 AM
I'm assuming yuo are tracking the US and not Aussie or UK or NZ etc

The US market is (namely the DOW ) at its second lowest close for the whole bear market.
pointing to the fact that this bear is very much alive and roaring.

Sp500 even the ASX. within striking distance of the lows. eg 1-2 days trading.

So technically speaking the bear is very much alive as of today.

winner69
11-02-2009, 11:54 AM
I'm assuming yuo are tracking the US and not Aussie or UK or NZ etc

The US market is (namely the DOW ) at its second lowest close for the whole bear market.
pointing to the fact that this bear is very much alive and roaring.

Sp500 even the ASX. within striking distance of the lows. eg 1-2 days trading.

So technically speaking the bear is very much alive as of today.

ASX200 still in a downtrend ..... but an optimistic would say consolidating around the 3500 mark

Hoop
11-02-2009, 07:57 PM
I'm assuming yuo are tracking the US and not Aussie or UK or NZ etc

The US market is (namely the DOW ) at its second lowest close for the whole bear market.
pointing to the fact that this bear is very much alive and roaring.

Sp500 even the ASX. within striking distance of the lows. eg 1-2 days trading.

So technically speaking the bear is very much alive as of today.

Disagree....only when a new low(bottom) is reached will I agree.

Footsie
12-02-2009, 08:30 AM
i've found that a 13/34 week m/a provides a reasonable long term indicator of a bear/bull phase and the 13/34 day m/a provides a faster short term indicator

Both are still on Bear


The 13/34 day m/a will easily get me tranching back in when the market is only 10% off its lows.

Unless you beleive in a complete almost vertical V shaped recovery (starting now) there is still much consolidation to occur (at best) at worst the new lows lie ahead.
I cant see the weekly m/a crossing for some time yet

I remain unconvinced.

Hoop
12-02-2009, 09:55 AM
This is a secular ST thread remember...this thread deals with very long market index behaviour to indicate what strategies investors should employ ....not everyday noisy events with ultra short term assumptions that seemsto be taking up our time at the moment... there are other ST threads for that.

Footsie quote.."I'm assuming yuo are tracking the US and not Aussie or UK or NZ etc.."

Basically yes...with reference to this ST thread the DOW has over a 100 years of data and is the most researched index in the world so information using the DOW makes sense..also S&P500 is well researched and also has a long history. Using this thread a poster can't recite NZX50 accurately because this index has not been around long enough to give us reliable long term (secular) information.
Very long term history's tell us, what we are now experiencing is not an unusual one off event..it has all happened many times before and we should learn from that.

Footsie... I track many indicator charts each day and see most of my automated daily updated charts (probably about 30 out of about 50 or 60) each day ...many are not in equities some are in those indicators I have shared with readers on ST


Therefore your assumption is wrong....I do track the various Aussie and the various NZ ..etc....every day.


The most informative thing I have learn't from tracking using my own automated programs is how mis-informative the media is at the moment
some good news examples being ignored at the moment:
***FTSE 100 has been in a confirmed minor (secondary) uptrend since 21 Nov 2008. Primary trend is still down
***NZX50 has been in a confirmed minor (secondary) uptrend since 21 Nov 2008 primary trend is still down
***NASDAQ 100 and Canada (TSX) has been in a confirmed minor (secondary) uptrend since 21 Nov 2008 primary trend is still down
*** The DAX and Hang Sing recently broken upwards out of its trend boundaries
*** China the 2d/3rd biggest economy in the world!!! Shanghai Market index has recently experienced a Primary trend reversal ..officially in a Bull market now


***Gold (priced in US$) is experiencing a short/medium term uptrend but is still in a longer term downtrend since March 2008



Note No 9 indicator in my post quote
9... History: Equity markets bottom out halfway (58%) trough an economic recession.
NZ was one of the first countries in the western world to enter their recession during this present global downturn..is NZX50 one of the first to see the Equity market recovery? ...personally, its looking good at the moment.


Yes bears are still operating with the ASX200 Presently testing and retesting its bottom, nervous times here, but the good news is that it has respected the previous bottom (3300) so maybe a future bullish rather than bearish sign? time will tell.
Note No 9 indicator... Aussie was one of the last countries to enter the recession (some say it still hasn't)


Most charts I use are looking OK now...some aren't great but no signs of doom and gloom that past us by in October -December when all my charts looked like crap... yet the media and the people who recite media links seem to be living in the past. If these media reciting people actually sat down and did their own research rather than reading about it second hand they would see a different picture emerging since Xmas...Yes we know times are tough and some extremely tough in some sectors of the marketplace but there are other sectors that are creaming it at the moment ..where is the media with these market sectors...absent !!!
Typical human behaviour of the end part of a bear market cycle as outlined by the DOW Theory

Footsie
12-02-2009, 02:13 PM
Hoop

excluding insolvency

Tell me a sector that is creaming it...... and dont say infastructure, because I dont believe you.

Hoop, whilst you might be right and I'll be more than happy if you are. You have to ask yourself. We have seen the biggest worldwide wealth destruction since the 1930's est. 40% of global wealth wiped out. The entire world is in recession at the same time (rare).
The bear market has only been running for 15 months, i'd expect there to be a false dawn at some point this year and it could well be a bear rally which runs 30-40%, heck it might even last 4-5 months. But i understand that anything can happen. so i woulndt bet my life on that scenario

I respect your research and your calls as you picked the top. So whilst i'm a non-believier at present i have an open mind.

Stranger_Danger
12-02-2009, 04:12 PM
Footsie. I take your point and know of no sector that is "creaming it".

You are right to be worried about demand destruction - I sure am!

Some sectors I believe are suffering less demand destruction than others are gold (producers only), debt collection, waste management and discount retailing.

Like basically every company in every sector, they're having to fight for every dollar of sales and cut every dollar of expense they can. However, I believe these sectors are relatively better positioned to lose less demand than most, and that which they lose is arguably compensated by the multiples available.

Three other sectors that many would call defensive are healthcare (too expensive), regulated utilities (too much debt) and other infrastructure (too much debt) - I don't like these sectors for the bracketed reasons.

I'm finding these times fascinating - even the definition of "defensive" is up for grabs.

One question many should be asking but aren't. Would you rather have a company with very defensive revenues, but lots of debt, or, be more exposed to consumer demand but have no debt and cash on your balance sheet?

I'd choose the latter and am trying to go one better so seek good balance sheets with *some* demand defensive qualities.

Hoop
12-02-2009, 10:46 PM
Footsie, maybe of interest for you

An interesting fact, the IMF (http://www.earthtimes.org/articles/show/240434,imf-slashes-economic-forecasts-global-recession-in-2009--summary.html) declares a World recession when the world growth rate falls below +3% :confused:

Your quote...."..The entire world is in recession at the same time (rare)..."

I guess your statement is similar to my "creaming it" statement ..a loose statement but I can comprehend the meaning of it, so no worries:)..However, your statement did make me think that I would like to know more , so this link (below) I found, identifies which Countries in the World that are curently in recession and also lists those that aren't. Outlook for rest of 2009 shows some countries will enter recession and some will come out of recession The author** is overall rather pessimistic for 2009 much more pessimistic than the IMF.
http://www.forbes.com/2009/01/14/global-recession-2009-oped-cx_nr_0115roubini.html

**Author ..Nouriel Roubini, a professor at the Stern Business School at New York University (http://topics.forbes.com/New%20York%20University) and chairman of Roubini Global Economics, (http://www.rgemonitor.com/) is a weekly columnist for Forbes.com. A number of analysts at Roubini Global Economics assisted in the writing of this week's column.

Footsie
13-02-2009, 08:23 AM
Hoop the statistics might not show it yet, but this is a "world recession".
how much worse does it have to be, to not be a world recession.
Sure perhaps Peru might not be, but i'm sure you get my drift.

Roubini, Marc Faber and Nicolas Taleb, forget Peter Schiff (he is a negative doomsday man).
THese guys cut the crap and know what they are talking about.

Most are calling for a U shaped slow recovery beginning in 2010. Based on that when would the next bull begin... who knows.

Question i have,
Does the market bottom at the inflection point where the bad news stops getting worse and there is less bad news?
Or does the market bottom only once there is good news?

Both of the above are likely to be well before a statisical recovery in employment and GDP stats.

Hoop
13-02-2009, 10:20 AM
......Question i have,
Does the market bottom at the inflection point where the bad news stops getting worse and there is less bad news?
Or does the market bottom only once there is good news?

Both of the above are likely to be well before a statisical recovery in employment and GDP stats.

Yeah I agree that the statistics inform us of the better times much after the recovery has already begun.

Researchers agree that Equity Markets recover much earlier, usually during the worst last half of a recession.
Taking all the recessions and the equity bear markets into consideration throughout history, researcher have found that Equity markets recovery commences on average 58% through a recession...so the rule of thumb is, expect a recovery to begin halfway through a recession.

I have mentioned this in my #177 and #185 posts as an bottoming indicator. The tricky part of course is defining where a recession halfway point is when an Equity market bottom has not yet been confirmed.

Dow noticed that at the mature end of a bear market cycle ...the market becomes immune to the continuing bad news.... I think we are at this point or nearly there.

Footsie quote...."...Most are calling for a U shaped slow recovery beginning in 2010. Based on that when would the next bull begin... who knows...."

Interesting comment that most seem to be more negative now and very positive in 2010.
I'm a little bit positive now and negative later in that I am expecting a slight upwards curvy L-shaped recovery or a "reversed J - shaped" with one or two retesting of the bottom. Remember many markets have entered into a secular bear cycle. The USA has been in one now for 8 years so an U-shaped recovery is the absolute best scenario you can ever have during a secular bear market cycle (supercycle). You'll never get a J-shaped recovery in a secular bear market cycle (supercycle).

Footsie
18-02-2009, 12:33 PM
hoop

I have been running similar sets of indicators to you (based on Russell Napier;s book) and not one has triggered yet.

I believe that whilst this bear remains alive there is a chance of the dow going to 5,000
at 5,000 you have a Q ratio of 0.30x

Hoop
18-02-2009, 06:08 PM
hoop

I have been running similar sets of indicators to you (based on Russell Napier;s book) and not one has triggered yet.

I believe that whilst this bear remains alive there is a chance of the dow going to 5,000
at 5,000 you have a Q ratio of 0.30x


Hmmmm... interesting post...

Foostie can't comment about your indicators because I haven't seen any yet.

I posted mine earlier for posters to see and for them to add more to the list, or if enough posters agreed to delete some which didn't quiet fit the requirements.
Out of the 3000 members only you Foostie have been active in giving me constructive criticism (which I do appreciate). It takes many different viewpoints and many collective brains to be able to construct any sort of system of value...so any type of feedback is important. It seems most posters are happy just to sit back and see if I land on my feet or on my backside ;)...

Either way I'm mobile, (I do listen to other peoples opinions) I have again cashed up some in the rally and taken my profits :cool:, and some losses:( and await this new downturn to bottom for the usual buy back ins. (Still using my Bear market Investment Strategies). The only sad thing for me is I'm now getting half the amount of interest than before in my holding account.:(

I can't comment much about the Q Ratio either... I'm not sure that I totally understand it...so I'm probably missing the point here with my comment below, (Footsie you may help me here)...... but as I see it, valuing the worth of the going concern of a company in times of uncertainty and negativity to obtain the Q ratio seems a very hard assessment to do with accuracy...harder still using the DOW index (30 companies) and near if not impossible for S&P500 index (500 companies)

Hoop
19-02-2009, 09:05 AM
Footsie. I take your point and know of no sector that is "creaming it".............

Check out Delegat's half year annoucement (http://www.directbroking.co.nz/directtrade/dynamic/announcement.aspx?id=2165549)

Footsie
19-02-2009, 03:46 PM
I wrote a massive reply then got "timed out" and lost the lot.

http://advisor.morningstar.com/articles/article.asp?docId=3903
refer to this article.
the best time to buy equities was when the p/e was less tan 10x but we can't all wait decades.

You just have to use your judgement.

Re the best time to buy
I dont want to make predictions :)

I have a view, but it's flexible as nothing is certain.
Hope for the best, prepare for the worst - should be the motto of bear markets

PS re my indicators - they match Russell Napier's top half dozen.

Hoop
04-03-2009, 11:18 AM
* Commodities Count. The end of commodity price declines also marked all 4 major equity lows, with copper playing a prominent role as it preceded or coincided with every equity rebound. Russell Napier

Copper update




http://i458.photobucket.com/albums/qq306/Hoop_1/spot-copper-6m-04032009.gif

http://i458.photobucket.com/albums/qq306/Hoop_1/lme-warehouse-copper-60d04032009.gif

impacman
04-03-2009, 12:18 PM
I was looking at the LME Copper charts today as well and although I have no real understanding of TA the charts did seem to at worst indicate stabilisation of prices and at best an upward trend.

In addition some of the shares I have been watching and expecting to retrace don't seem to be doing so - or at least not much over the last month or so. (BOW, AOE, STO, CSL, etc). Others like PNA are trading big volumes and holding their position. Certainly intra sector factors are distorting things to some extent e.g. CSG plays, but I am not seeing the big retracement I would have expected given poor reporting results for year end on the ASX and worsening global environment. Could this indicate a bottom?

To be honest I have no idea and other than observation my musings above have as much validity as throwing darts:D Just thought I would throw my thoughts into the mix.

Footsie
04-03-2009, 01:06 PM
GRR it happened to me again

timed out and missed my whole post

here is the gist

My target to the downside for the Sp500 is 500

There were four massive stock bubbles in the 20th Century: 1901, 1929, 1966, and 2000. During each of these bubble peaks, the S&P 500 neared or exceeded 25X on professor Robert Shiller's cyclically adjusted P/E ratio. After the first three of these peaks, the S&P 500 PE did not bottom until it hit 5X-8X. We're still in the middle of the last one.

Based on Professor Shiller's latest numbers, we're at about a 12X P/E. (Prof. Shiller's last update was at 805 on the S&P 500, which produced a 14X P/E. Plugging in today's 700 on the same earnings number, we get about a 12X P/E). The 12X PE compares favorably to the long-term arithmetic average of 16X, but it's still way above the historical troughs of 5X-8X.

Using Professor Shiller's latest earnings data, here's where the numbers would fall out if the market just kept dropping and 10-year average earnings didn't grow from today's level:

P/E S&P 500 Level
10X 575
8X 460 (highest previous trough low)
7X 400 (average previous trough low)
6X 350
5X 300 (lowest previous trough low)

tobo
07-03-2009, 02:39 PM
I find this analysis very interesting.
Based on this, the question is :
will this particular trough go real low, like the all-time low (because this crunch is just so "global" compared to past ones, because of the internet etc),
or will it not be not so bad because of all the frantic (and "informed?") machinations of goverments.

One thought is to have a look at interest rates at each of those cycles, to see if there is a relationship to the PEs.

Not sure if i know where to look. US Bond rates?
(ie can't consider some sort of average global interest rate because this a nonsense what with differing soverign risks). We are comparing with US not global stock market anyway?

winner69
07-03-2009, 03:39 PM
tobo .... seeing its a weekend here is your homework

http://www.crestmontresearch.com/pdfs/Financial%20Physics%20Presentation.pdf

Find out that -

Contrary To Conventional Wisdom, P/E Ratios Are Not Driven
By Interest Rates: P/E Ratios Are Driven By Inflation

and much more

Hoop
10-03-2009, 09:09 PM
Hi Footsie + Others

A little clarification.
Your post deals exactly with secular cycles and governed by P/E Ratios not share indexes.
Usually secular cycles have an average life span of over 10 years and the average life of a secular Bear cycle is 14 years but it does vary somewhat. As the S&P 500 has been in a Secular bear cycle for 8 years and the P/E Ratios* have been slow to drop until 2008 combined with a recent bull market phase contained within this secular cycle it suggests this secular bear should see a long life, perhaps beyond the average life due to end in the year 2014.

Footsie your example of P/E S&P 500 level below
P/E S&P 500 Level
10X 575
8X 460 (highest previous trough low)
7X 400 (average previous trough low)
6X 350
5X 300 (lowest previous trough low)
is mathematical logical but it is not feasible in normal secular situations as it would take an extreme event to kill this secular bear prematurely in 2009 or 2010...a drop of the S&P 500 index to 300 would be this extreme event to kill it. I don't say it can't happen because it did happen in 1933.

To comprehend these secular cycles over time ..the charts below give investors perspective during times of great information hype as what we are experiencing now...What seems logical now during economic upheaval is usually not what happens in the future...seeing past events and numerous economic upheavals from charts can keep people perspectives in bounds of rationality.



http://i458.photobucket.com/albums/qq306/Hoop_1/djiaa_us04mar94_to_12sep09.png




Note that since 2000 the DOW has not set much higher highs (horizontal red lines), this is typical in a secular bear cycle

During a secular bear cycle the P/E Ratio downtrends and must downtrend to below 10 before an uptrend starts which then signal the start of a new secular bull cycle. With reference to the DOW chart above even with the 2008 crash this Secular bear still has a long way to go before it dies.

Note Paradox to normal layman's logic... (from the chart) that the bull Market cycles within the secular bear cycle does not make the P/E Ratio go up, (see 2003 to 2007 Bull market cycle on chart) often it still falls but at a less decelerated pace. The paradox is that a bull market cycle phase will extend the life of a secular bear not shorten it.

So we can assume that a bull cycle is not uncommon in a secular Bear Cycle and there could be many bull cycles in an very long secular Bear cycle.


On the second chart

http://i458.photobucket.com/albums/qq306/Hoop_1/dji80yearchart10032009.png

It shows a long term 80 years of secular cycles for the DOW
Note that the figures are P/E Ratios* ranges red for secular bear cycles blue for secular bull cycles

During secular bear cycles bull market phase tops are flat or nearly flat (red trend lines). The index from the start of a secular bear cycle to the end of the secular bear cycle does not increase much and often it decreases (red trend lines on chart) showing evidence that an investor should not use a long term portfolio investing strategy** especially starting at the end of a bull market cycle within the secular bear. As the NZX 50 has entered a secular bear cycle at the end of 2007 Investors knowing this function of secular bear cycles would not opt for indexed linked equities in the new Kiwisaver plan released last year.
Note all the long term index gains are made during secular bull times (green trend lines on chart) so sometimes workers can be disadvantaged with their superannuation plans depending on when their 40 year working life occurs some may strike it unlucky by experiencing 2 secular bear cycles to 1 secular bull cycle, whle others in a different time period strike it lucky. The last thing a young 18 to 25 year old person would be thinking of when taking out a life insurance policy or some sort of indexed super scheme would be secular investment cycles..a shame really.

The area circled in red is interesting ..it shows the 1974-75 bear market phase within the 1966-1981 Secular bear cycle similar to what is happening now....notice the 1974-1977 period all the index gains lost in the bear market phase was regained again and the P/E Ratio figures were similar throughout.
During these present times of Doom and Gloom and no hope, it is very hard to imagine an event which occurred during 1974-1977, but, that event proves a point with a realistic view that it would not be impossible to see a (2009) 2010 - 2011 bull market cycle phase with a 50+% index gain with little to no rise in P/E ratio*.


**See Winner69 post#1 on this thread



What might seem logical is usually not...and paradoxes and illogical perceptions can be true.
such as:-
A great depression kills secular bears prematurely and creates an equity bull rush. One would assume a great depression would cause stocks to stay in limbo for many years but from history this is not true.

and

P/E ratio falls is realistically possible in a period of rising index levels (uptrend), but only in a secular bear cycle, and not possible in a secular bull cycles

Footsie
11-03-2009, 03:36 PM
So what are you saying Hoop

now is the time to Buy>?

Hoop
13-03-2009, 08:44 AM
* Commodities Count. The end of commodity price declines also marked all 4 major equity lows, with copper playing a prominent role as it preceded or coincided with every equity rebound. Russell Napier

The copper indicator suggests the Equity Markets have bottomed or is now in the process of its last bottoming event. Nearly all the other indicators I use confirm (except US$ decline)

Copper update

http://i458.photobucket.com/albums/qq306/Hoop_1/spot-copper-6m-12032009.gif

http://i458.photobucket.com/albums/qq306/Hoop_1/lme-warehouse-copper-6m-12032009.gif

Footsie
13-03-2009, 08:56 AM
My personal view is that markets will need to re-test the lows we have just seen before we can mount a meaningful recovery.

This implies a sharp rally up now, and another sharp fall down.

Technically the market needs more time at these levels before it can commence recovery.

However, we have been primed for a decent bear rally as the pessimism last week was overwhelming..... everyone had become chicken little.
I felt it myself

Whenever this happens the market turns. I felt the same way in March 08, Oct/nov 08 and again march 09. It's just a feeling of total dispair. Horrible. When I get that feeling I close my short position.

I will definitely ride this rally, but wont be giong back into LONG TERM "buy hold" positions

Footsie
05-05-2009, 11:34 AM
whats everyone thinking now?

Stranger_Danger
05-05-2009, 01:08 PM
Nice rally and took longer than expected to get here. Not the real thing.

Hoop
05-05-2009, 01:33 PM
Nice rally and took longer than expected to get here. Not the real thing.
My trading account with lots of $$$$$$$$ added recently looks real to me.

Stranger_Danger
05-05-2009, 02:24 PM
Hoop - oh, mine too. Up more than 100% on a whole heap of stocks.

I believe we'll retest the lows though.

Hoop
06-05-2009, 12:11 AM
Hoop - oh, mine too. Up more than 100% on a whole heap of stocks.

I believe we'll retest the lows though.

You pessimist you:D:D

Footsie
03-06-2009, 01:05 PM
It now appears most markets in asia have confirmed bottoms in place and even by the most conservative TA standards are now in a bull market phase.

USA is lagging. but that's how it should be as ASIA will be the first region to recover they rae much better placed.
I recall Marc Faber stating back in late feb how totally undervalued singaporean stocks were(vs US stocks that werent all that undervalued). Those who listend have done well with the exchange up 40%+

That's not to say that this current bull market might only be a short one (perhaps 12-24 monhts?)

If you are an equity investor and you arent currently long the market. You have to be asking yourself why not.

Hoop
30-10-2009, 08:35 PM
Continuing the friendly :) discussion from the Daily S&P500 index tracker thread

Ananda.. The problem in how you see a contradiction in my post maybe caused in how you think the stockmarket indexes works within a secular bear cycle as opposed to a secular bull markets ..there are many differences.

Refer your table (post#82) (http://www.sharetrader.co.nz/showthread.php?p=279783#post279783) (which I can't unfortunately seem to copy over to this thread) ...Apart from 30 years bonds you haven't mentioned any of the more important secondary drivers mentioned by Minsky**. You have included lots of what I jokingly call "media drivers" because they work for a day after the media mentions them:):) ...Many secondary drivers (yeah alright.. some "media drivers" as well) work accurately only at certain stages of cyclic event within a certain stage of a secular event....These are best described as specific situational indicators (did you see my 23 specific situational indicators to determine the birth of the new cyclic bull calf on this thread Post #177 (http://www.sharetrader.co.nz/showthread.php?t=5171&page=12)). Even though most of my OK specific situational indicators had turned positive the two most important indicators were still undetermined DOW theory a yes? but the most major indicator Copper was not yet confirmed it had a lift saying 4 to 6 weeks equities may commence a sustained uptrend but it wasn't until the 13 of march 2009 that the copper indicator had confirmed positively (see post#202 on this same page). Out of all the indicators the DOW and Copper (commodity count) were the most important two.The Copper indicator has a 100% success rate in picking the bottom of a share market (hasn't failed yet over the last 130 years!!!)..... As one can now guess many people + media recite these drivers/indicators at the wrong time, recite the weaker indicators rather than the stronger ones and using this misplaced logic to forecast a wrong outcome which no body remembers anyway...a reason why media keeps doing it without due accountability. ....examples.. peak oil excuse causing high oil prices is an absolute classic... closely followed by peak unemployment going to cause an economy to suffer further and cause a recovering share market and economy to crash again.

When indicators are used correctly they are forecasting gems to the investor...... Unemployment peaks can be seen in the early and middle stages of a cyclic bull and can be used as a OK indicator (not always perfect) to determine what phase of the cyclic bull cycle the market is in ...with these OK indicators you need many more to confirm each other as they are not totally reliable on their own..

I have developed specific situational indicators to determine the death of a cyclic bull market within a secular bear cycle but research is not completed yet so not willing to publish them just now ...in its beta form most of these indicators are not firing negative signals yet..so the cyclic bull is still healthy.

Minsky should be researched deeper...

**Prof Minsky has labeled 4 main indicator/drivers to a share market
Volatility (vix)
Valuation (PE & bonds)
Anecdotal evidence ..many!!! ...one being investors behavioural actions
Secular market profile (bear or bull and at what stage)


Ananda
The Fundamental* drivers you mentioned differ between 1981 and 2009
(*your key fundamental drivers is disputed by me but that's been covered already)

Sadly your examples..the two cyclic bull markets starts ..the 1981 compared with 2009 is comparing cheese with chalk...these two bull calves are different species.
These two bull recoveries( 1981/2009) are so different that you can not compare them with economic statistics.
Why???..because 1981 was the start of the first cyclic bull within the new just born secular bull cycle. the 2009 year sees the 2nd cycle bull within a middle aged secular bear market.

Without going though the whole lot ..lets take the first one... CPI...Yes I noticed the big difference in 1981 CPI (your figure +8.9% my figures is +10%) to that of 2009 CPI. (your figure -1.3% my figure ?) It does not mean the 2009 bull is prematurely dying due to low CPI-itis + all you other stuff on your table
Explanation, its a secular thing....the CPI Inflation is always highest (+10% and higher) at the end of a normal secular bear market cycle and beginning of a secular bull (1981)
Paradoxically, CPI Inflation is always the lowest (-1% to +2%) during the end of a normal secular Bull market cycle and beginning of a secular bear cycle.

High deflation (-5% or lower say -10%) usually means something is systemically broken. It can happen in both cyclic bull or cyclic bear markets and its secular bull or bear market cycle period usually ends early with a premature death.

Rising and high Inflation (+10% or higher) is a strong specific situational indicator in determining that a secular bear cycle is nearing an end (maybe 3 years left before death).

As you see the low 2009 CPI is showing the secular bear is still in great health with many more years of life.

ananda77
31-10-2009, 12:48 PM
Hoop:

...do Really appreciate the issues you write and know a lot about, but Mr.Hoop, to me you sound like an academic who is stuck head over heels in a theoretical loop;
what you describe as primary drivers of a bull market is no more or less a consequence of market pundits, be they individual or institutional, tossing around their CASH;
...and that (CASH AND THE WILLINGNESS OF PEOPLE TO PART WITH IT) is what people should look at first as the most important determinant of a market situation

...as for the contradiction thing, I was referring to the fact that you are 87% invested at present, so logically you ARE saying, you are 70% sure this current cyclical bull will continue to run, despite severe potential restrictions facing the most universal driver for ANYTHING to go ahead and that is CASH (like: potentially higher interest rates, higher taxes; dwindling demand, over-indebted households etc,etc,)

...after today's trading session, the wave 3 down has further found fertile soil to grow and unlike the intermediate wave 3 down in 2008, this wave 3 down will be of primary degree within the -as you agreeably call it- a very healthy and alive secular bear market

Midnight Candles http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2009/Midnight+Candles+Gross+November.htm

William H Gross (Pimco -managing director-): What you see in the bond market is often what you get. Broadening the concept to the U.S. bond market as a whole (mortgages + investment grade corporates), the total bond market yields only 3.5%. To get more than that, high yield, distressed mortgages, and stocks beckon the investor increasingly beguiled by hopes of a V-shaped recovery and “old normal” market standards. Not likely, and the risks outweigh the rewards at this point. Investors must recognize that if assets appreciate with nominal GDP, a 4–5% return is about all they can expect even with abnormally low policy rates. Rage, rage, against this conclusion if you wish, but the six-month rally in risk assets – while still continuously supported by Fed and Treasury policymakers – is likely at its pinnacle. Out, out, brief candle.


Kind Regards

Hoop
01-11-2009, 10:07 AM
Ananda
Quote ...Hoop:
...do Really appreciate the issues you write and know a lot about, but Mr.Hoop, to me you sound like an academic who is stuck head over heels in a theoretical loop;

Nah...not loop..cycle!:cool:

Hmmm...if that means learning mathematics at school makes one a mathematics academic..then yes..I'm guilty as charged.

Hey..Surprise!!.."Hoop the academic" does practical as well :D:D..been excellent this year my best year ever:D ..even had to pay the taxman last year as well :p

It seems you are a non-believer in basic Share Market Theory...Oh well your choice...takes all sorts of investors to make a market....wish you Ananda the best of luck ..you'll need it.

oh ..forgot to mention
Yep... still 85% invested...going to ride this bucking Bull ..yeeeehaaa

RazorX
01-11-2009, 01:32 PM
Hi Hoop

Most people/analysts/experts are saying that this bull is going to come crashing down. In fact some people are saying I'm mad not to have sold shares in mid October. My theory is to hold my shares as the market goes down and when it hits the bottom its a good time to look for any opportunities to buy more and then ride the market back up.
Any thoughts on this?

RazorX

Hoop
02-11-2009, 12:47 AM
Hi Hoop

Most people/analysts/experts are saying that this bull is going to come crashing down. In fact some people are saying I'm mad not to have sold shares in mid October. My theory is to hold my shares as the market goes down and when it hits the bottom its a good time to look for any opportunities to buy more and then ride the market back up.
Any thoughts on this?

RazorX

Hi RazorX
Most people/analysts/experts are saying that this bull is going to come crashing down. Depends on what media you read or hear. for example on SKY95 CNBC closing bell after the big sell down last friday on Wall St, they polled the traders on the market floor and over 70% said the market would be higher than now by Xmas. Who's right?

In fact some people are saying I'm mad not to have sold shares in mid October....and as usual I betcha they said that to you when the correction started last week.:) For the record... TA didnt start diverging until the 20th October on the ASX ..At mid October everything was still rosy..no reason to sell then.

My theory is to hold my shares as the market goes down and when it hits the bottom its a good time to look for any opportunities to buy more and then ride the market back up.
Holding shares as the market goes down is only right when:-

1 If its a 80% (70% is OK for some hardier souls or long term investors) chance that the outcome is known e.g a mild bull market correction or something less, and you are using a medium to long term investment strategy. Short term traders are already out...gone!!!..irrespective of this being a 5% zigzag, bull correction or something more sinister.

2 If the downtrend is more severe or turns into a cyclic bear cycle some stocks become defensive... unless they trigger the TA sell signal you could keep them. Some stocks are inversely correlated meaning the steeper the drop the more they rise obviously ..you keep these too, but ditch all your remaining stocks...cash is king. The more experienced traders do play the sucker rally game with good results.

3 If you have an extra long term investment strategy but only when you are in a secular bull market cycle.

4 You have preplanned stops levels in place forall your stocks...as insurance just in case it is that unexpected 20-30% chance that comes true as outlined in 1.

5 Probably something else that haven't thought of at this moment of writing.

Bottom?? ..never easy, nearly if not impossible to predict that point, most people during May 2009 did not think the March 2009 was the bottom. There are still some people out there on the sidelines even now who still think March 2009 is not the bottom and this 50% increase is one mother of all cyclic bear market rallies. As silly as it may sound in hindsight they have missed one of the biggest rallies. The ASX has dispelled that BM rally reasoning as it has broken up through the primary downtrend at the end of August 2009 (NZX50 much earlier in May 2009) but the DOW and the S&P500 have still yet to do this....so this reasoning lives on in the biggest financial area in the world. The respected Elliot wave principle shows that the 10500 on the Dow is the end of the up wave and retest of the bottom or worse is predicted...who right?

Rather than play the hold as the market goes down game.. If you new to this game or only been in it a while and have limited investment tools at your disposal, I suggest you to follow Phaedrus index charts with his improved indicator and adopt those investment strategy signals.

..Ride the market back up..
oh yes..definitely buy here and keep buying by averaging up...commonsense really, but its amazing how many investors don't do this...major reasons vary but usually they keep seeing invisible bear demons and keep listening and believing in the permabears and act accordingly....easy in hindsight though..eh:)

Hoop
06-01-2011, 11:06 AM
2009 2010 years shows a cyclic bull market within a secular bear market cycle.

With time the PE Ratio downtrends within a secular Bear market cycle to bottom out at around or under 10.

We are 10 years in this latest secular bear and the adjusted annualised (Schiller) PE Ratio is standing at 22.6. (31 December 2010)

At first glance this seems high considering the length of time this current Bear has been in progress...however closer scrutiny shows the PE to be around or slightly lower than it could be for this low inflationary environment. Low inflationary periods keeps the annualised PE higher than normal.

http://i458.photobucket.com/albums/qq306/Hoop_1/SP500HistoricPE.jpg

winner69
07-01-2011, 06:21 AM
Hoop - just to remind us that secular bear markets last a long time .... and have four recessions during them on the average.

Just confirms stock selection and a close eye on the charts is the way to go .... as long term the markets not going anywhere for some time



Be afraid: a new 'Ice Age' is coming

January 6, 2011

.There's a bear out there … and he's got a chilling warning for investors, writes Nils Pratley.

Sharemarkets ended 2010 on an upbeat note and there is an air of optimism among investors and a confidence among economists that a double-dip recession has been avoided. A tough moment, then, to be bearish?

Not for Albert Edwards, the best known bear in the City of London. He has seen nothing to dent his Ice Age thesis - the term he coined as early as 1996 to describe the relative decline of equities versus bonds.

He thinks there may still be another Japanese-style ''lost decade'' to endure. ''Big structural bear markets take 19 years on average and have four recessions,'' he says. ''We've had two.''

Edwards is thus sticking to two eye-catching predictions. Sharemarkets will revisit their March 2009 lows. And, despite the hints in recent months of a return of inflation, gilt yields will fall below 2 per cent (from 3.5 per cent today) as deflationary forces reassert themselves. And for good measure, prepare for a hard landing in China and the crash in commodity prices.

Ridiculous? Well, remember that Edwards's Ice Age call in 1996 has proved to be a winner: even if you include the sharemarket's dotcom bubble years at the end of the 1990s, equities are still a long way behind bonds since 1996.

Remember that Edwards's forecasts were rubbished at the time.

His dismissing of the supposed Asian Miracle in the mid-1990s as ''Noddynomics'' was resented - until the Asian currency crisis of 1998. To Edwards's amusement, correspondents to his employer were still trying to get him sacked in 2000. ''Send this old, sclerotic and dangerous man into pension or … take him to prison,'' said one. ''He's obviously ill and not qualified to be chief strategist of Dresdner Kleinwort. I hope his prophecy will destroy his career for the next thousand years.''

In fact, the Ice Age prophecy has been the making of his career. He started out in the Bank of England's economics department, spent three years in fund management and then had a 19-year stint at Dresdner Kleinwort until 2007. He and his colleagues (at the French bank Societe Generale) have been the top-rated analysts in the ''global strategy'' category for seven years, despite being too quick out of the blocks with some predictions.

At times, though, during the great banking bust, Edwards's views have come close to becoming consensus wisdom. The same cannot be said about his view on China.

''The biggest risk to market valuations and to sentiment generally is a China hard landing,'' he says. ''China is a much more potentially volatile economy than people think. The Chinese situation is the one that could come out of nowhere because people are not considering it as a serious possibility.''

But hasn't China been gloriously unaffected by the turmoil in the West, producing growth of 10 per cent or so with little difficulty? Edwards's argument is that ''when you have a good crisis, success can become a curse''. Japan sailed through the 1987 crash. Similarly, the US economy escaped with a shallow recession after the bursting of the dotcom bubble; house prices started to rise as the authorities declared a period of stable inflation and ''great moderation'' to be under way.

''Then what happens is that the housing and credit bubble goes out of control,'' argues Edwards. ''You tap your foot on the brakes and the whole thing starts crashing and you can't control it on the downside,'' he says. ''China is exactly the same. It had a very good crisis in 2007, opened the credit floodgates, got a house price bubble going, and they're now trying to tap their foot on the brakes.''

In Edwards's view, China is a ''freak economy"; its investment-to-GDP ratio is off the scale in terms of size and endurance. ''In development history, Korea is the only one that got close. It then collapsed. China is basing a growth model on the most unstable part of GDP. The Chinese authorities have recognised this and are trying to steer the economy over to consumption - which is fine, but it will take a long time.''

The danger is that China has produced such strong growth for such a long time that investors assume the process will last indefinitely.

''There is too much confidence in the lack of volatility. If you get a zero or a small minus for Chinese GDP, in the great scheme of long-term development it's not a great problem. But it's a bit like investing in Nasdaq stocks in 2000 - there would be a big adjustment in price. There is an investment edifice built on the idea that China is the new growth engine of the world.''

He points to the OECD's leading indicator of economic activity, which measures factors such as electricity production, freight activity and money supply. In China, it is slowing rapidly, even though commodity prices are as elevated as they were in early 2008 (prices then plunged). Something has to give - and probably sooner than most people assume. The degree of ''pushback'' from clients to his view on China reminds him of the resistance to his bearish calls on the dotcom and east Asian bubbles.

Closer to home, the Ice Age thesis suggests disappointments for the economy are inevitable. Edwards points to Japan, which enjoyed occasional rallies in share prices without conquering its long decline.

The lesson is that ''to avoid recession you need to stimulate all the way through the deleveraging phase''. That makes Austerity Britain more vulnerable to recession than the US.

The middle classes have been ''totally shafted'' by a house-price bubble that created the illusion of prosperity. ''In the US, one in eight are on food stamps. Japan was a cohesive society that shared its pain collectively. That is not how it stacks up in the US, UK, Spain, Greece etc. You have a much more fractious environment to have a lost decade in. The ructions for society will be far worse.''

So Edwards's answer to the question that obsesses investors at the moment - are we past the worst? - is a resounding no. Or, as his final research piece of 2010 put it: ''I've been doing this job long enough to recognise when the markets are entering a new phase of madness that leaves me scratching my head with bemusement.

''The notion that we are back in a sustainable economic recovery is as ludicrous as it was in 2005-07. But investors are back on the dance floor, waltzing their way towards the next, inevitable implosion, [which] yet again they will no doubt claim in retrospect was totally unpredictable!''

http://www.smh.com.au/business/be-afraid-a-new-ice-age-is-coming-20110105-19g9y.html

Hoop
19-01-2011, 10:03 AM
Hoop - just to remind us that secular bear markets last a long time .... and have four recessions during them on the average.

Just confirms stock selection and a close eye on the charts is the way to go .... as long term the markets not going anywhere for some time......



Interesting 2011 Outlook by Martin Pring...lots of historical charts.
The secular bear may has found the Bonds hiding place and time may be up for the cyclic Bull to die by mid 2011

In PDF format and allow for about 20 min to read.......http://www.pring.com/endofyear2010.htm

winner69
19-01-2011, 10:24 AM
Thanks Hoop for those

Hussman's workings have 3.3% pa return (inc dividends so essentially no price gain) on the S&P over the next 10 years

As always just remember the market is going nowhere for the next 10 years .... select your stocks well and keep a close eye on those charts.

Hoop
05-03-2011, 08:56 AM
An Article of interest from http://tradersnarrative.wordpress.com/2010/12/16/a-cyclical-bull-market-within-a-secular-bear-market/

This topic has been well documented on this thread...however it is the statement and link (According to the 18 year commodity/stock market cycle (http://www.tradersnarrative.com/the-18-year-stock-market-commodity-cycle-2760.html) we still have about 6 years left to go.) within this article which caught my eye as it is the hot topic at this moment in time. I will post the linked article under this post

A Cyclical Bull Market Within A Secular Bear Market

Posted on December 16, 2010 (http://tradersnarrative.wordpress.com/2010/12/16/a-cyclical-bull-market-within-a-secular-bear-market/) by Babak (http://tradersnarrative.wordpress.com/author/tradersnarrative/)
With the year winding down, equity strategists are busy putting out their outlook for the next year. In a recent article (http://www.bloomberg.com/news/2010-12-14/history-shows-u-s-stocks-may-surge-again-in-2011-chart-of-the-day.html) David Wilson, of Bloomberg, featured a report from Binky Chadha, Deutsche Bank’s chief US equity strategist which seemed familiar.
Chadha pointed out that the 10 year rolling return of the S&P 500 index is now in one of those historically rare troughs. And based on this, suggested that the next 10 to 15 years will be very good for stocks.
Long time readers may remember highlighting this amid the darkest days of the 2008 bear market: Why Long Term Investors Should Consider Buying (http://www.tradersnarrative.com/why-long-term-investors-should-consider-buying-2099.html) and again in March 2009, just as the bull market was starting: Revisiting the Long Term Bullish Case for Stocks (http://www.tradersnarrative.com/revisiting-the-long-term-bullish-case-for-stocks-2350.html).
Here is an updated chart from early 1900′s to now:
http://tradersnarrative.files.wordpress.com/2010/12/monthly-rolling-10-year-returns-sp500-index-dec-2010.png?w=625&h=356
Source: Data from Prof. Shiller
It is important to note that the data is based on ex-dividend S&P 500 index levels and that dividends provide a significant boos to total returns. But since we are also ignoring transaction costs and taxes, let’s pretend that the difference is small.
In any case, the chart can be interpreted in differing ways depending on your personal bias. If you’re bullish, it is indicative of blue skies and a forecast of a similar run up to 280-300% returns within the next decade.
If you’re bearish on the other hand, it confirms just how bad things are. After all, previous intervals of history that shared similar negative returns are infamous to any trader: 1932, 1939 and 1975. Those were grueling bear markets that devastated portfolios and made mincemeat of the majority of investors who tried to time the ensuing markets.
Personally, I’m agnostic. I used this chart originally to offer a calming (very) long term perspective. A bear market can be very painful emotionally and it is easy to get caught up in the fear and loathing. So hopefully the previous two times that I wrote about this helped some people to come to grips with the fact that the world was not, in fact, ending.
This therefore, is more useful in pointing out that the worst is over, rather than being a predictor of better times ahead. According to the 18 year commodity/stock market cycle (http://www.tradersnarrative.com/the-18-year-stock-market-commodity-cycle-2760.html) we still have about 6 years left to go.
That is, if we assume that the huge base that is being built by the major indexes going sideways won’t be over for the typical 17.6 years and if we assume that it started at the 1999 bubble top. As I outlined yesterday, the current bull market is healthy (http://tradersnarrative.wordpress.com/2010/12/14/technical-overview-week-of-december-13th-2010/) and will probably continue. But it is a cyclical one. A secular bull market of the kind that propelled stocks like a rocket from 1982 to 1999 isn’t around the corner.
That’s why I don’t agree with Chadha’s forecast for the S&P 500 index to close at 1550 by the end of 2011. This, by the way, is the highest forecast by at least 100 points. Chadha also had a very bullish bias for 2010, estimating that the S&P 500 index would finish this year at 1325 (or 7.3% higher than today’s close).

Hoop
05-03-2011, 09:36 AM
Carrying on from the post above..
Just to let people know that my views about Davvid Rosenburg has not changed...Yes he is a great Economist but I think he is not entirely impartial ..He is permabear and I get this feeling he's not in full control of his bearish emotions when he delivers his facts...however I must congratulate and give the Guy credit when credit is due..

Quote from the above posted article..."
According to the 18 year commodity/stock market cycle (http://www.tradersnarrative.com/the-18-year-stock-market-commodity-cycle-2760.html) we still have about 6 years left to go. "

Note : This 18 yr Stock cycle thing they mention is the average time period of the secular Cycle. Both Winner 69 and I have mentioned many times on this thread that the S&P DOW current Secular Bear Cycle will die sometime in the 2016 to 2020 time frame.
As the Secular Bear started in 2000 the average cycle would see a secular turn in 2018.

The interesting point about this article below it was published in July 2009.
It is common knowledge that Commodities has reverse correlation of sorts with the Equity secular Bear cycle and David Rosenburg reminded people then that they were in a time of a commodity secular bull market cycle. What David and others did not count on was the severity of this sudden sinister looking drop within this supposedly commodity Bull market cycle ..the GFC effect on the Commodities bull cycle looked at that time in 2009 to have killed the Bull....however when David Rosenberg was questioned about this in 2009...he responded that the commodities index would recover and rise up again (hence assuming the Commodity Bull market cycle was still intact) against many others experience opinions including the author of this article...GOOD CALL DAVID ..his call was rational see below this posted article

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The 18 Year Stock Market & Commodity Cycle (http://www.tradersnarrative.com/the-18-year-stock-market-commodity-cycle-2760.html)

Published July 14th, 2009 in Natural Resources (http://www.tradersnarrative.com/category/natural-resources/) Tags: 18 year cycle (http://www.tradersnarrative.com/index.php?tag=18_year_cycle), Art Cashin (http://www.tradersnarrative.com/index.php?tag=art_cashin), bull market (http://www.tradersnarrative.com/index.php?tag=bull_market), cnbc (http://www.tradersnarrative.com/index.php?tag=cnbc), commodities (http://www.tradersnarrative.com/index.php?tag=commodities), crb (http://www.tradersnarrative.com/index.php?tag=crb), David Rosenberg (http://www.tradersnarrative.com/index.php?tag=david_rosenberg), deflation (http://www.tradersnarrative.com/index.php?tag=deflation), Dow Jones (http://www.tradersnarrative.com/index.php?tag=dow_jones), jim rogers (http://www.tradersnarrative.com/index.php?tag=jim_rogers).
If we step back from the day to day movements of the stock market and take a very wide perspective, we notice some overarching cycles at play. One of these is the 18 year stock market. Some, like Art Cashin in the video below, express it as a 17.6 year cycle but in reality this is not a precise determination. The 18 year cycle is more an average than an accurate, regularly repeating cycle:
http://www.tradersnarrative.com/wp-content/uploads/2009/07/18%20year%20cycle%20dow%20jones%20industrial.jpg
Since stock prices are supposed to be random, it is odd to find such an orderly pattern. Why equity prices follow this rhythm may not be so befuddling if we consider commodity prices as their counter balance. For example, zooming in, we can see the period from 1980’s to the present for the Reuters/Jeffries CRB Index, the most popular proxy for the commodity markets:
While the equity markets went on a generational bull market from the 1980’s to their top in 2000, the commodities markets were in a painful and protracted bear market. This wasn’t just a coincidence. Over the long term, equities and commodities are on a teeter totter: when one is up, the other down; when one wins, the other loses. Of course this relationship isn’t evident until you step back from the short term fluctuations.
http://www.tradersnarrative.com/wp-content/uploads/2009/07/CRB%20futures%20index%20long%20term%20chart.png
The rationale for this is simple. The price of physical goods are expenses for corporations as they are the raw materials to produce things. When the costs increase, profits decrease. This trend continues until it reaches an inflection point where it can not continue. Profits decrease and a retrenchment takes place. Demand decreases for raw materials and their prices fall.
Then this trend continues until investments in the acquirement and production of raw materials is ignored. Mines take billions of dollars to develop and can take decades to ramp up production. Oil reserves likewise are expensive to find and exploit. As the current supplies are depleted, the prices of physical goods rises. It continues to rise until it reaches a tipping point when investment in the sector once again is lucrative. And the wheel turns again.
I was introduced to this cycle when I read Hot Commodities (http://www.amazon.com/gp/product/0812973712?ie=UTF8&tag=kqr9r8-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=0812973712) by Jim Rogers. This is a great introductory book to the commodities markets by the way. I highly recommend it.
According to economist David Rosenberg, we are halfway through the current bear market. This estimate is in keeping with the 18 year cycle if we assume that the top was in early 2000. And the counter estimate is that we have the same period of time left in the commodities bull market. But something is amiss.
The CRB index crumbled 57% from its top in 2008. We haven’t seen such a decline before in a commodity bull market. Those are serious deflationary forces at play right now in the world economy. Which is why central banks are throwing everything and the kitchen sink at it to prevent it from spiraling out of control. Here is a free 60 page book from EWI (http://www.elliottwave.com/a.asp?url=/deflation-survival-guide.aspx&cn=9tn) about the dangers of deflation and how to position yourself both defensively and offensively to benefit.

(http://www.elliottwave.com/a.asp?url=/deflation-survival-guide.aspx&cn=9tn)
Rosenberg continues to believe in a healthy commodity bull market but I’m not so sure. What we saw last year was not a normal bull market but a speculative bubble caused by lax regulations (http://www.tradersnarrative.com/bona-fide-hedging-exemption-reinflates-oil-bubble-2712.html) which allowed large institutions to run roughshod over everyone else and walk prices higher. The aftermath of bubbles is always ugly and unpredictable to some degree so I have my suspicions that the regular cycle was tampered with, in a sense, by this.

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CRB future index chart above ends at July 2009. A casual eye over that chart a laymen would assume the 8 yr bull is dead and buried... The knowledge of History and correlating past data between Commodities V Equities on a secular nature and faith that over a longer term nothing is different this time to last time would have uyou predicting that Commodities would rapidly rise back up creating a charted down spike anomally within the Commodity secular bull market cycle.

When will this present Commodity Secular Bull Market end???....probable when the Equity Secular Bear market ends...(average , in the year 2018)

Caution: Secular Bull Market cycles contain cyclic bear market cycles

Hoop
05-03-2011, 10:38 AM
Follow on post
The last post showed the CRB index Commodities index) chart up to July 2009.

So what has happened since Jul 2009 to now?
Are we witnessing a Commodity bubble?

The chart below says no bubble and it seems commodities still have plenty of room to go upwards.

Remember... the secular market inverse correlation between Commodities and Equities.
Remember...Secular bulls create new record breaking highs ..secular bears don't

http://i458.photobucket.com/albums/qq306/Hoop_1/Commoditiesindex04032011.png

Hoop
07-03-2011, 10:28 AM
I mention this post on the Depression ASX thread but I have added the primary driver PE Ratio chart as a extra comparison...Over the very long term PE Ratio is the primary driver of the stock market. and as is shown below Inflation is the key secondary driver. The yield rate correlates the secondary driver inflation as shown on the chart.

NOTE the PARADOX ...inflation falls in the Secular Bull Market
How many people have been brainwashed by the media in thinking that during the Equity boom times it is the other way around ....eh


Beware of the doomdayists who picks bits out of the overall picture to "valid" their argument.

Permabears have a field day with "blips" (the unexpected dips in the charted areas) and because they are so easy to see the permabears will produce their convincing short term charts to prove their argument.

At this point in time half way through a secular bear market cycle the yield rate is only 1.78% .This in isolation sounds bad ...but...note the very low iflation rate (correlation) and both were lower last year so it is rising. Secular cycles have their crises and from the chart you can see that the lines can deviate widely from the loose trend lines...This happens all the time so to say that this time is different has so far been unsubstantiated.
As you can see from the charts the yield rate jumps all around the place during the secular cycle but there is a trend from the beginning and the end of each cycle.

During the Secular Bear the yield trend is up but there are many dips over 15 of them in the bear cycles this last 15 months is just another dip to add to the collection.

One thing that history can tell you is that when (2018?) this current secular bear market is over the inflation rate will be high and the yield rate will be correlated higher as well


http://i458.photobucket.com/albums/qq306/Hoop_1/SP500Dividendyield.png


http://i458.photobucket.com/albums/qq306/Hoop_1/InflationRateUSA.png
http://i458.photobucket.com/albums/qq306/Hoop_1/SP500PEratio.png

Hoop
30-07-2011, 12:49 PM
Today marks an important DOW close at 12143 It is testing its primary uptrend line. If it breaks downwards it could signal the end of this cyclic bull market cycle and a commencement of the next cyclic Bear market.
History shows us that secular bear markets seldom reach higher highs therefore it can assumed that the DOW index is in a position where it may not rise much further before the Cyclic Bull dies.

The charts are self-explanatory ....the blue numbers on the chart represent the 3 stages of a cyclic bull market 1 the climb of the wall of worry 2 the breather 3 the perception that the good times are nearly here and the fear of falling is low.. exuberance.. (see Vix chart)

Notice on this old (produced in 2006) but still relevant Millyaville chart how the DOW index enters into an uptrend when the PE Ratio enters an uptrend (secular bull market)and flattens out and enters a trading range during the down trending P/E Ratio (secular bear)..

Since the year 2000 the DOW has been in that trading range era again suggesting the DOW is now at the high-end and will soon head down to test the low end (6500) of the range again.

http://www.imageurlhost.com/images/x9x3gtgo85wihi991fm.png
http://www.imageurlhost.com/images/o37x0c49g1fuwpn3eyfd.gif

Hoop
01-08-2011, 10:40 AM
Hoop, the decline of the USD against most other currencies will see the DOW climb further yet (but just don't tell anyone that the DOW et al have been tanking for ages except when measured in USD).

DOW been there done that many times before just a cyclic thing ,,,same with US $

Note ...no correlation between the state of the economy and the DOW (long sustained growth seems to be positive for the DOW so an argument of a sustained growth type of correlation could be debated.
..........no correlation between the US$ index and the DOW
..........Maybe correlation between some (not all) recessions and the low US$ index
A selection of 40 year charts is not enough time data to make any correlation conclusion

http://www.imageurlhost.com/images/bzdsb44zykyei0upqiz.png
http://www.imageurlhost.com/images/8stmvxpje50c7a4olvzd.png
http://www.imageurlhost.com/images/2w19g9m8r1t3udt1eh.png

Hoop
03-08-2011, 07:34 AM
Today marks an important DOW close at 12143 It is testing its primary uptrend line. If it breaks downwards it could signal the end of this cyclic bull market cycle and a commencement of the next cyclic Bear market....

Closed down 266 to 11867 (-2.19%).
The same day the debt - limit bill was signed into Law...The media hype around this bill lasted weeks and unnerved the global markets. Its resolvement should have seen a period of days with a relief rally.. it did but it only lasted a few hours...reinforcing my belief that this Equity weakness is technical based and the cyclic Bull to Bear cycle transitional phase has begun.

Hoop
04-08-2011, 09:24 AM
Closed down 266 to 11867 (-2.19%).
The same day the debt - limit bill was signed into Law...The media hype around this bill lasted weeks and unnerved the global markets. Its resolvement should have seen a period of days with a relief rally.. it did but it only lasted a few hours...reinforcing my belief that this Equity weakness is technical based and the cyclic Bull to Bear cycle transitional phase has begun.

The DOW theory signalled a primary tide Bear Market at close on the 2 August 2011 see my DOW thread post #789 (http://www.sharetrader.co.nz/showthread.php?6114-Dow&p=353186#post353186)

winner69
12-09-2011, 06:59 PM
Here's an Aussie view on a lot of the things that Hoop and myself have been talking about
http://www.businessspectator.com.au/bs.nsf/Article/bear-market-All-Ords-Dow-recession-crisis-delevera-pd20110908-LH2H5?OpenDocument&src=sph&WELCOME=AUTHENTICATED REMEMBER

Only problem this guy reckons a secular bear market has just started in Australia ... and these run for 15 years.

As always don't forget that many bull markets within a secular bear ... keep an eye on the charts nad make the most of these opportunities . .. but buy and hold is not the way to go

Lizard
13-09-2011, 08:28 AM
Though taking a whole-of-market point of view, it isn't possible for everyone to be getting in and out. Surely, over time, this behaviour contributes to more volatility, with moves becoming ever more dramatic and self-fulfilling until it becomes too fast to trade and reversal occurs (i.e. buy falls, sell rises)... although, perhaps more likely that it just reaches the point where large majority just put sharemarket in the too-hard basket and end up with lack of liquidity, wide spreads and barely a pulse?

winner69
13-09-2011, 09:43 AM
Though taking a whole-of-market point of view, it isn't possible for everyone to be getting in and out. Surely, over time, this behaviour contributes to more volatility, with moves becoming ever more dramatic and self-fulfilling until it becomes too fast to trade and reversal occurs (i.e. buy falls, sell rises)... although, perhaps more likely that it just reaches the point where large majority just put sharemarket in the too-hard basket and end up with lack of liquidity, wide spreads and barely a pulse?

Ultimately that is what happens at the end of a secular bear market .... total lack of general interest ... boring boring ... all to hard ... and only the serious investors (not traders) are left to pick up the bargains

Simplistic view and no doubt more traders / shorting / derivatives upset the norm (historical perspective) but you are about right with your prognosis

Hoop
13-09-2011, 11:49 PM
At that time investing becomes very simple ... (at least for me) ... If solid stocks with histories of growing earnings have yields (or CG) beyond what I can get from a term deposit - I'm into the best ones. Its that simple IMNSHO and bugger whatever shorterm trends are saying. :)

Ahhh but Belg at that time it won't be like today...this is a problem that investors have, they relate better yields tomorrow with todays perspective....sad to say it doesn't work like that...
Secular bears have similar characteristics to its shorter term cyclic cousins. Remember the old saying for the cyclic bear market..."The bear market doesn't scare you out it wears you out". Now relate that saying to over a longer period of time. As Winner and Liz have pointed out by the end of a secular bear market there's very little investor interest .....it's likely they have all waited and waited for the market to fundamentally correct itself and have by now run out of patience watching those PE's sink to below 10 and nothing is happening and eventually they have had enough....It has become too hard to win in this market and they see easier and better opportunities elsewhere and they move to greener pastures lowering that demand/price relationship even more so.

In the final stages of a secular bear market cycle history tells you that:
Buying in Investor is very fussy and wants a much better return for their money than before. Investor frustration...cheap fundamentals underpriced shares with high yields low P/E 's but the market continually refuses to revalue them.
Demand is down because the smart money is partying up large elsewhere and the rest are already in and waiting... money is tight ...so little demand, lack of momentum, lack of speculative opportunities, no interest ....yep boring.

Thats OK I hear Belg say I have high quality high yielding stocks of 8% and I can wait

It may not be OK...because the investment scene is different. In the final stage of a secular bear market cycle history has told us over and over again that there will be high inflation (double digit) ..raised cash interest rates.. high mortgage rates.. fiscal controls in place to control inflation, tighter money supply....etc

Shares waxing and waning in price yielding 8% now doesn't sound like a very good investment anymore when you can get 10+% in the bank or buying into a rising property market...so even though the companies could be in a business cycle boom, the share price is likely to do a paradox and fail to rise so to produce a higher yield rate to increase buyer demand.....and the P/E's keep getting lower and lower.

Hoop
24-09-2011, 12:06 PM
Investor Behaviour during a cyclic change ..an extreme view

I admit this is a very very extreme example and the probably has a very low chance of happening ATM...but on a smaller level the behaviour is similiar.

I have used this thread to illustrate the Group Investor Behaviour and the individual investors
emotional response to a drop which they could not comprehend.
After a period of rapid capital gains and a crash to correct ....individual investor confusion results when the market bounced back up returns to a cyclic Bull market but only to see it petered out prematurely turning downwards once again when a recovery is perceived to be just around the corner. These investors still have hope and their arguments are based around Fundamental analysis...technical analysis is ignored and why notas these Companies are making profits once again the stocks are giving large dividend yields...but the stocks are falling therefore stocks are undervalued....a chance to buy cheap shares...correct??? Yes.... perhaps it's just an extreme bull market correction...it has happened before.

Adding to the confusion the Jekyll/Hyde media reporting investor unrest with major money worries at a country/global level with media releases from people "in the know" reporting we shouldn't fear as the worst is over...

“The Government’s business is in sound condition.”Andrew W. Mellon, Secretary of the Treasury
-December 5, 1929
RESERVE BANK AREAS FORECAST NEW YEAR
Despite the obvious slackening of the pace of business at the close of the year, leaders in banking and industry throughout the country maintain an optimistic attitude toward the prospects for 1930.
-January 1, 1930

MORTGAGE MONEY SCARCE
-February 23, 1930
“The worst is over without a doubt.”
James J. Davis, Secretary of Labor.
- June 1930
‘BUSINESS CYCLE’ SEEN AT NEW PHASE; Bankers Hold Downward Trend in Markets Indicates Recovery Is Near. DENY ANALOGY TO 1920-21 Economists Point to Superior Credit Conditions Now, Holding Easy Money Points to Revival.
-July 6, 1930
BIG BANKERS PUT UP $100,000 SAFEGUARD; House of Morgan Among Those Required to Provide Protection for Investors. -August 3, 1930
“We have hit bottom and are on the upswing.”
James J. Davis, Secretary of Labor.
-October 10, 1930

SCHWAB FORESEES RECORD PROSPERITY;
-October 25, 1930
“30% OF STOCKS SELL UNDER BOOK VALUES; Capital Is Above Market Price.”
-December 14, 1930



During the transition from Cyclic Bull to Bear Cycle ...no-one really knows the cycle has changed... many still think it is a bull market correction
However as time moves on stocks fall on any bad news excuse... more and more investors begin to realise that a cyclic change is happening and those investors in denial resort to quoting reported Fundamental Analysis to keep their hopes and arguments alive.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The unnerving thing is that some of these 1930 problems seem rather similar to today's problems. This latest cyclic bull market is seemingly dying at a young age...and the Europe mess is increasing investment risk thereby pulling the stock prices down and raising yields atm

Has there been a cyclic change recently???

...so far its a Yes and No answer Yes a bull to Bear shift to All Ords Shanghai Brazil Germany..and some others and No to USA Some of Europe, NZ...however all these indexes are in a bear tide ATM and any more drops will see some of these entering a cyclic shift as well.

http://www.imageurlhost.com/images/dq54b1hn6ez5by014vz6.jpg

winner69
25-09-2011, 10:18 AM
Hoop - your PM box is FULL and needs a clean out if you want to get more messages

winner69
25-09-2011, 11:18 AM
Might have to wait until Tuesday afternon for the real bargains

(from Mauldins newsletter this week but seems widely quoted -

"The Thursday/Monday Syndrome – We had suggested yesterday that we should probably explore the history of what old fogey traders refer to as the Thursday/Monday syndrome. While it would be pretensions to say that was prophetic, it was, to say the least, serendipitous, for yesterday's action looked like the perfect first step in a Thursday/Monday setup.

"We had intended to give you a more thorough history of the syndrome with lots of analytical examples starting with the classic one – October 1929. Unfortunately, events are moving too fast this week, so we have neither the time nor space to wax poetic on the topic. So, you will just have to rely on my recollections of 50 years of watching markets and hundreds of nights studying market history.

"The classic Thursday/Monday syndrome starts with the kind of action we saw yesterday. The markets open under pressure and selling accelerates in swelling volume. By early afternoon, there is a virtual stampede of selling. Then, later in the session, stocks stabilize a bit based on some reassurance. On Thursday, October 23, 1929, that reassurance came in the form of Richard Whitney bidding '205 for 10,000 steel' on behalf of the bankers' rescue pool. (Read a terrific account in the chapter 'The Crash' in Fredrick Lewis Allen's marvelous and essential 'Only Yesterday'.)

"The action on Friday (and Saturday in the case of 1929) is uneven, often ending choppily steady or somewhat weaker.

"Then on Monday, the trapdoor opens with liquidation and margin calls bringing tsunamis of selling.

"Is that what's going to happen? Who knows? If it were that easy, kindergarten kids could do this. But chance favors the prepared mind. Old fogeys will guard against undue risk and exposure. Some may even get out a special shopping list. They will set their basket right, put in silly bids and hope some panicky soul throws a bargain in. Recall the story of the floor messenger boy, who, in 1929, according to legend, bought White Sewing Machine with his silly bid of one dollar when all other bids canceled.

"One final note on the syndrome. Not infrequently, the Monday massacre spills over into Tuesday morning – a capitulation bottom in mid-morning resulting in a massive reversal to the upside."

Lizard
25-09-2011, 05:05 PM
I was just thinking yesterday that it was probably time for a "turnaround Tuesday" to rally into end of quarter and 7-10 days beyond.

winner69
26-09-2011, 06:59 PM
I was just thinking yesterday that it was probably time for a "turnaround Tuesday" to rally into end of quarter and 7-10 days beyond.

The trapdoor may have opened today .... good start to the day and a terrible ending to the day eh

So does the big rally start tomorrow afternoon then?

Watch this space

Lizard
27-09-2011, 05:59 PM
The trapdoor may have opened today .... good start to the day and a terrible ending to the day eh

So does the big rally start tomorrow afternoon then?

Watch this space

There goes that theory... I guess now that everybody's on to "turnaround Tuesday", they are all going to start buying Mondays...gosh, that's going to be hard on the Monday hangover crowd.

And since we didn't get the proper reversal pattern, I suppose any rally is unlikely to get us much past another 280 points on the Dow. Kind of hardly worth attempting to trade for most of us.

Someone mentioned yesterday to me that stockmarket apathy is rising, and I have to say that at a personal level it is becoming a bit of a conscious effort to stay interested.

RRR
28-09-2011, 07:24 PM
Someone mentioned yesterday to me that stockmarket apathy is rising, and I have to say that at a personal level it is becoming a bit of a conscious effort to stay interested. Quote

Yes indeed. May be this market is for late gratifiers and the patient - that is wishful thinking, why not. The activity on this website has reduced considerably, but mud throwing exercise continues unabated - will see less of that in a bull market! I can't wait for the next bull market, whenever it will be.

winner69
29-09-2011, 10:28 AM
You got that right! Capitulation in progress.



How long does it take total capitulation to unfold Belg

Methinks it is a longish process that slowly unfolds and not a process where one wakes up one day as says 'total capitulation'

One measure is the few postings on ST these days eh .... appears as if many of the those who appeared to be newish to the market have given up .... leaving it to you, Liz (although she signing signs of weakness) and Hoop along the resource punters to hold the fort

h2so4
29-09-2011, 11:40 AM
It's October next week :scared:

Lets hope depressed stocks and big dividends put a floor under this capitulation.

Lizard
30-09-2011, 11:25 AM
So own up! Which of you b#gger took out those MHI sellers? I was planning to do it this morning and one of you beat me too it. Not pleased at at all. Very ungentlemanly behaviour.

Teach you to go pump it on the forum, belg... you know you are probably attracting a big following these days, now that you're one of the few people on ST that can still be followed IN rather than OUT. Wasn't me though.

Lizard
30-09-2011, 11:31 AM
Teach you to go pump it on the forum, belg... you know you are probably attracting a big following these days, now that you're one of the few people on ST that can still be followed IN rather than OUT. Wasn't me though.

I actually did buy a few things this week. The broker said "you're brave", so that made me happy. I think he has said that to me about 3 or 4 times over the years, and every time, when I looked back, I wished I'd bought more...

Old habits die hard though. When it comes to investing, patterns only seem to form in time to be contradicted. Most of my cash still stayed in the bank.

Lizard
30-09-2011, 12:04 PM
I didn't mean to imply that most of my money was in the bank - it is pretty much back in balance for now - not overweight or underweight too much at all, although I'm having yet another dilemma over whether to reduce NZ property trusts. It was just that, on past history, the "you're brave" comment suggests that if I truly was brave, I would go overweight equities for now.

However, on consideration, I will have to leave that to you, Belg. I'd rather stay married. :p

Jay
30-09-2011, 12:17 PM
I'll admit to taking a few (emphasis on a few) out @ 81 (MHI) to top up my existing holding - especialy with the dividend record date today

h2so4
30-09-2011, 02:40 PM
The upside down pyramids of Auckland must be becoming quite a tourist attraction.:D

Jay
30-09-2011, 03:16 PM
Water- My pryamid is the right way up - my original buy price is a lot lower. :confused:

h2so4
30-09-2011, 04:15 PM
Water- My pryamid is the right way up - my original buy price is a lot lower. :confused:

You must have one of the ancient ones. :)

Hoop
24-11-2011, 08:05 AM
I nice easy read to understand the comparisions of 2 secular bear cycles on the SPX.... the 1966 - 1982 and the 2000 - 20?? and its cyclic bull and bear cycles within those 2 secular cycles. ,,,
...so...is this latest (2009 -201?) SPX cyclic bull market dead??? Adam Hamilton reckons not yet (Note this article was written 5 months ago)

http://zealllc.com/2011/newbear.htm

However John Hussman thinks differently...also look half-way down his article ...there is a colourful box of statistics on the past duration time periods of cyclic bulls and the percentage increase of each...Ok the Bull duration is about average but the percentage increase was above average...so maybe the Bull is dying (Note this article was written 6 months ago)

http://www.hussman.net/wmc/wmc110516.htm

Hoop
24-11-2011, 11:32 AM
A follow up to the above articles....

We all know crystal ball gazing is a dangerous sport....however analysing past events normally keeps you on a solid footing...hmmm sometimes though writers come unglued :mellow: but this time it only shows human behavioural thinking at a time of a economic recovery

I find it a valuable exercise to go back to past history and re-read these types of articles and find out what went wrong.

George Boubouras, author of 5 reasons why shares will rally in 2011 (http://www.asx.com.au/resources/newsletters/investor_update/20101214_five_reasons_why_shares_will_rally_in_201 1.htm) will probably wished he never wrote this article on the ASX.com site back in December 2010.

His article showed all the charts etc and looked real good and well researched so what happened when he expected the AllOrds to be at 5600 by now. I wonder if that environment of the time affected his reasoning....seeing an economic recovery in progress it is tempting to add today's variable into a tomorrows assumption....a mistake we see or hear a thousand times each day.

I can see George now saying that the current economic environment is worse now than I expected ..yes correct... it is obviously much worse than then and the market has corrected itself according...but was Georges expectations back in December 2010 set too high..Could this had been picked up as a fault at the time of writing...In hindsight we can safely say yes.......Hmmmm..hindsight..

However ... past history is scattered with over and under expectations and these are factored into secular behaviour.......ahhhh I hear George say when someone tells him that he forgot to add this secular factor into his crystal Ball gazing. Yes no hindsight to blame here..this should have been picked up at the time of writing.

Ok...to save making this post even bigger that readers will turn off ..lets use only one secular example in a diagram he mentioned.

Chart 2: Australian equity valuations well below long-term average.....

How many times have I heard a Fundie say that the stock prices are well undervalued...(remember this Article was written in December 2010 when the ASX was uptrending past 4900)..... Now the shares today are cheaper at 4100 and downtrending and company profits are still up there where they were back in 2010...so its even cheaper now???...Markets crazy or what???

People tell me ..."why carry on about secular cycles when investing in the present time? whats the point??"...Well..the point is the pure example below

No the ASX200 is not crazy.... in reality, back in Dec 2010 the stocks were very overvalued!!!! not undervalued as George writes....The ASX200 is in a secular bear cycle and as such that market will operate below that PE long term average of 15 and the PE will keep falling probably to 8 or less before that Secular Cycle changes back to Bull and the PE ratio will then uptrend.

His chart has ASX200 looking very undervalued

http://i458.photobucket.com/albums/qq306/Hoop_1/20101214_five_reasons_why_shares_will_rally_in_201 1_image2.gif

His chart amended by me to allow for the ASX200 Secular Bear market Status...notice that his last orange ring showing "Valuations simply discounted too agressively" now looks like they weren't....looks very different now...eh? This chart shows ASX200 was still a little overvalued back then.

http://i458.photobucket.com/albums/qq306/Hoop_1/ASX200PERatiochart.gif

trackers
01-12-2011, 07:52 PM
really interesting post Hoop cheers... Hope you're wrong, 2014 is too far away for my liking :D

Hoop
21-02-2012, 09:03 AM
Today marks an important DOW close at 12143 It is testing its primary uptrend line. If it breaks downwards it could signal the end of this cyclic bull market cycle and a commencement of the next cyclic Bear market.
History shows us that secular bear markets seldom reach higher highs therefore it can assumed that the DOW index is in a position where it may not rise much further before the Cyclic Bull dies.

The charts are self-explanatory ....the blue numbers on the chart represent the 3 stages of a cyclic bull market 1 the climb of the wall of worry 2 the breather 3 the perception that the good times are nearly here and the fear of falling is low.. exuberance.. (see Vix chart)

Notice on this old (produced in 2006) but still relevant Millyaville chart how the DOW index enters into an uptrend when the PE Ratio enters an uptrend (secular bull market)and flattens out and enters a trading range during the down trending P/E Ratio (secular bear)..

Since the year 2000 the DOW has been in that trading range era again suggesting the DOW is now at the high-end and will soon head down to test the low end (6500) of the range again.

http://www.imageurlhost.com/images/x9x3gtgo85wihi991fm.png
http://www.imageurlhost.com/images/o37x0c49g1fuwpn3eyfd.gif

21 February 2012....Not long after that post the DOW did break its Primary uptrend line.

Using the Secular Bear market hypothesis the Dow is back in the middle of the secular warning zone once again but this time it's suspiciously looks like a retest...and the hypothesis paints a bleak picture.

The DOW is presently testing the 13000 barrier...Another 10% would see the secular bear ceiling....

Secularwise it looks like a mistake for the long term cautious investor to now enter into the DOW stocks excited by the news that the USA economic recovery has finally arrived and growth looks strong and sustainable ...

Update chart below

http://i458.photobucket.com/albums/qq306/Hoop_1/DOW20022012.png

Hoop
25-05-2012, 12:09 PM
Must admit I'm deeply troubled by CEN. I bought on the original listing $3.15 thinking it would pay for my daughters first year at university. That was 13 years ago and the current $4.87 price doesn't even cover half her hostel fees. I haven't sold but am close to doing so - in disgust.

I've read commentary that Origin are stripping Contact and will make another takeover offer after having successfully driven the company down. Clever business for them but awful for the average investor.

Responding to Winstons CEN Chart thread post, it suddenly became relevant for me to post it on this thread and adding my old diagram...... How a "right" investment decision in a long term strategy can slowly become "wrong" over a period of time without much change in the company's business fundamentals.

When the "right" decision doesn't go according to plan.. attempts to explain "why" takes centre stage, while the real reason may be hidden within the murky depths of Market Theory.

Often, secular effects are less noticeable with growth stocks or those stocks (darling stocks) in large demand..but..some sectors such as Utilities which have to rely on population increase or sustained business increases (emerging economy) to grow, the secular effects can be much stronger....I think CEN.NZ (Contact Energy) may fall into this category. The fact that CEN has a controlling shareholder and has seen market share loss muddy's the water when thinking "why??".

When thinking from a secular cycle point of view.....you can see the inherent dangers of lack of capital growth in a long term investment using so-called Blue Chip shares when the Stockmarket Index (e.g DOW AllOrds or NZX50) are trading with a Secular Bear Market Environment. As the years drag on the frustrated investor finally pulls out usually and often at the lower end of the Secular bear trading formation.

http://i458.photobucket.com/albums/qq306/Hoop_1/SecularInvestingStrategies.png

Hoop
24-10-2012, 10:49 AM
With the recent peaking of this current S&P500 bull market cycle ...fears are rising that the predicted unsustainable earnings are now becoming real...and it's consequences may result in a cyclic bull death around that the very significant secular 1500 level.

The Article below is from here http://www.marketoracle.co.uk/Article37103.html

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Stocks Bull Market Topping Stock-Markets (http://www.marketoracle.co.uk/Topic10.html) / Stocks Bear Market (http://www.marketoracle.co.uk/News-catid-155.html) Oct 19, 2012 - 11:12 AM By: Zeal_LLC (http://www.marketoracle.co.uk/UserInfo-Zeal_LLC.html)
http://www.marketoracle.co.uk/images/topics/stockmarket.gif (http://www.marketoracle.co.uk/Topic10.html)
http://www.marketoracle.co.uk/images/diamond.gifWith the US stock markets near major multi-year highs, traders are naturally very optimistic. Predictions abound for a continuing advance to new all-time highs. But behind this happy facade, the secular picture is actually quite bearish. The powerful stock bull of recent years appears to be topping in recent months. This means the odds are ballooning that a new bear market is being born or soon will be.
Few, if any, things are more important for stock investors to understand than the bull-bear cycles. They can only be ignored at great peril. Investors who refuse to study them inevitably end up buying stocks at the wrong times in these cycles. And that derails their wealth-building progress for many years. For example, today the US stock markets remain lower than they were in March 2000 over 12 years ago!



As stock markets march ever forward through time, they perpetually alternate between bulls and bears. The worst time to buy stocks is when these bulls are topping, as bears inevitably follow. And it is just such a major bull-market topping that is almost certainly underway today. So investors need to be very wary of all the recent complacency and greedy hype, as the bull-bear cycles argue this bull is ending.
Yes, cycles plural. There are two separate bull-bear cycles that are equally important, secular and cyclical. As the word itself means long periods of time, secular bull-bear cycles are the overarching strategic ones. Incredibly one full cycle (bull and bear) lasts a third of a century. I call these Long Valuation Waves (http://www.zealllc.com/2007/longwave3.htm). The first 17 years or so are a secular bull, the second 17 years or so a secular bear.
And it is in this secular-bear second half where the stock markets now languish. Today’s secular bear began when the last secular bull topped in March 2000. So we are now roughly 12 years into a 17-year secular bear. Secular bears exist because stock valuations get too extreme near the ends of secular bulls. So during these bears stocks grind sideways long enough for earnings to catch up with stock prices.
But alternating within secular-bear consolidations are the smaller cyclical bull-bear cycles. They are much shorter, lasting a few years or so each. It is these shorter cycles that make secular bears so profitable to trade. Cyclical bears cut stock prices in half, and then cyclical bulls double them. So prudent investors can sell high when cyclical bulls top, and later buy low when cyclical bears bottom.
All this secular-cyclical stuff may seem confusing at first, but a good chart makes it crystal-clear. This first chart looks at today’s secular bear as rendered through the lens of the flagship US stock index, the mighty S&P 500 (SPX). The last 13 years or so are rendered in blue, superimposed over the preceding SPX secular bear between 1966 and 1982 shown in red. The bull-bear cycles are readily apparent.
http://www.marketoracle.co.uk/images/2012/Oct/Zeal101912A.gif
Way back in March 2000, seemingly an eternity ago, the last 17-year secular bull topped when the SPX hit 1527. Though investors were greedy and euphoric then, expecting that bull market to power higher indefinitely, stock valuations were at bubble extremes. But all throughout market history, secular bears have immediately followed secular bulls. And indeed right when least expected, today’s bear was born.
Though secular bears are gigantic sideways grinds, they always kick off with a shorter cyclical bear. And indeed over the 2.6 years between March 2000 and October 2002, the SPX lost 49.1%! The stock markets had been literally cut in half, the SPX falling to 777 at worst. Investors who foolishly bought stocks in early 2000, right when it felt like the best possible time, were ripped to shreds by that cyclical bear.
But the bull-bear cycles dictate that cyclical bulls always follow cyclical bears. So out of those cyclical-bear lows in late 2002 a new cyclical bull was indeed stealthily born. It would ultimately power 101.5% higher over 5.0 years, doubling the SPX to 1565 by October 2007. Yet again at that last major topping, investors were greedy and euphoric. They expected stocks to rise forever, complacency ran rampant.
But with the SPX back near the levels where its secular bear began nearly 8 years earlier, a cyclical bear was due. And that one was a doozy, greatly accelerated by a once-in-a-century (http://www.zealllc.com/2009/pstpanic.htm) stock panic. By the time the dust settled only 1.4 years later, the SPX had plummeted 56.8%! It was essentially still cut in half, though that epic fear super-storm pummeled the SPX lower than a normal bear would have to 677.
Cyclical bulls follow cyclical bears, so from those panic ashes a new cyclical bull was indeed born. And coming from excessive lows, it would more than double the stock markets again. Over the 3.5-year span running to just last month, the SPX blasted 116.7% higher! And that brings us to where we are today, what is almost certainly the third major bull-market topping witnessed in this secular bear.
See the obvious secular-bear pattern here? A cyclical bear cuts stocks in half, then a cyclical bull doubles them again. At best the stock markets trade near their preceding secular-bull top that birthed the secular bear, and at worst they trade near half those levels. This recurring cyclical bull-bear-cycle pattern has carved major secular-bear resistance near SPX 1500, and major secular-bear support near 750.
And we are awfully close to that bearish 1500 upper resistance today! Last month after the Federal Reserve launched its highly-anticipated third round of quantitative easing, the SPX climbed to 1466. This was the best levels the SPX had seen since December 2007, just a few months after the last major cyclical-bull topping. In September 2012, the US stock markets were trading at a staggering 57-month high!
It’s no wonder investors are excited today with stocks near 5-year highs. Somewhat paradoxically since the core mission of investing is to buy low then sell high, investors love buying stocks high after major bull runs. And a 117% cyclical-bull market since early 2009 is a massive run by any standard. But it has catapulted the SPX to the top of its secular trading range, to the limits of this secular bear’s tolerance.
After the mighty 17-year secular bull failed near SPX 1500 in early 2000, and the first cyclical bull of this secular bear failed near 1500 in late 2007, why should we expect a different outcome for this latest cyclical bull? We are still mired deep within a 17-year secular bear, only about 3/4ths of the way through so far. And this 117% cyclical bull has already been considerably larger than the expected doubling.
Market history is crystal-clear, as this chart drives home. The 17-year sideways grind of secular bears consists of an internal oscillating series of cyclical bulls and bears. After a cyclical bear a cyclical bull is due, and after a cyclical bull a cyclical bear is inevitable. This pattern couldn’t be simpler, bull, bear, bull, bear. And since the last few years have enjoyed a massive cyclical bull, a cyclical bear is next in line.
And the stock markets’ position within these bull-bear cycles and the SPX’s giant secular trading range between 750 and 1500 certainly isn’t the only argument for a major bull-market topping being underway. Other critical indicators corroborate this, including the duration of today’s cyclical bull and the stock markets’ current valuations. This bull is way older than average and valuations remain far too high.
The previous chart had zeroed axes so the cutting in half by the cyclical bears and subsequent doubling by the cyclical bulls wasn’t distorted visually. This next chart zooms in for a higher-resolution view of the past decade’s secular bear and the cyclical bears and bulls within it. Neither bulls nor bears last forever, and today’s cyclical bull has already defied the odds to grow much longer in the tooth than its peers.
http://www.marketoracle.co.uk/images/2012/Oct/Zeal101912B.gif
Every secular bear is a sideways grind consisting of internal cyclical bears and bulls. And the best way to gain insights into how long these cyclical moves last is through past precedent. So this chart looks at the durations of every cyclical bull within the last two secular bears, today’s and the one that straddled the 1970s. Excluding today’s, which we are trying to game, there have been 5 other ones in modern times.
Their average duration was 34.8 months. A typical mid-secular-bear cyclical bull tends to run for just under 3 years. Provocatively as of its latest mid-September high, our current cyclical bull was already 42.3 months old! It is already much older than average, increasing the odds that it is imminently due to give way for the next cyclical bear. The markets abhor extremes, so they often spark big mean reversions.
The older any move gets, especially beyond typical durations, the higher the probability for a major reversal. And today’s cyclical bull is long in the tooth, already thriving well past the average life expectancy of its peers before it. When this old age is coupled with this cyclical bull’s bigger-than-average gains and proximity to the SPX’s 1500 secular-bear resistance, the topping case is compelling.
And valuations push it into overwhelming territory. Remember that the whole reason secular bears exist in the first place is to bleed off the excessive valuations of the preceding secular-bull topping. So secular bears typically drag general-stock-market price-to-earnings ratios from above 28x when the bear starts to under 7x before it gives up its ghost. Long-term fair value is halfway in between, at 14x earnings.
Incredibly the SPX was trading at 43.8x when this secular bear started in early 2000, deep into record bubble territory! And though great progress has been made in letting stocks grind sideways long enough for corporate earnings to catch up with prices, the SPX’s collective P/E has never come close to a bear-ending 7x yet. Not even during the worst levels of this secular bear, driven by 2008’s stock panic.
Heading into the primary stock-panic low, the SPX was trading at 13.0x earnings at the end of October 2008. And approaching the subsequent March 2009 secondary low, it was still way up at 11.6x. This is much closer to 14x fair value than the 7x cheap levels that mark the ends of secular bears. And just after this latest new bull high last month, the SPX’s P/E had once again soared back up to 19.8x earnings.
The job of a secular bear is to maul stocks from extremely overvalued levels to extremely undervalued ones. And despite more than 12 years of stock prices grinding sideways at best, and being cut in half at worst, we’ve never seen anything close to 7x earnings secular-bear-killing valuations. So this secular bear is far from over, having lots more work to do before it finally achieves its original and only mission.
Thus the bull-bear cycles make the case for a major stock-bull topping being underway very clear. Today’s cyclical bull is already much larger than normal, with gains far exceeding any of its peers in modern times. And it is already much older than average, increasing the odds it is due to roll over. And it is near the graveyard in the sky, secular-bear resistance around SPX 1500. And stock valuations remain way too high as well.
Against this ominous backdrop, the past month’s weak stock-market behavior is very telling. Remember that this cyclical bull originally topped way back in early April. But despite many easy attempts, the SPX couldn’t break out to new highs for over 5 months. It wasn’t until the major central banks started to try to goose the markets in early September that the US stock markets finally managed to make headway.
First the European Central Bank’s bond-buying pledge arrived. For years the markets had eagerly anticipated the ECB buying up troubled European sovereign debt to keep high yields from exacerbating Europe’s debt crisis. Yet even when the ECB pledged unlimited buying, the best the SPX could muster was a 2.5% rally over two trading days. This did finally push it to new bull highs, but that rally was weak considering the news.
And then a week or so later after the ECB’s inflationary quantitative easing, the Fed satisfied the desperate and long-awaited desire for QE3. This campaign was open-ended (http://www.zealllc.com/2012/fedqepm.htm) just like the ECB’s, exactly what the markets wanted to see. Yet the best the SPX could do after waiting well over a year for this very announcement was a 2.0% rally over two trading days. This was an extraordinarily weak response.
If you actively trade the stock markets, you know how big of deal the European debt crisis and desire for QE3 have been to traders. There was nothing they wanted more, hanging on every word any Fed official uttered since QE2 ended. There was no more potent buying catalyst possible! Yet after both the ECB and the Fed gave traders exactly what they wanted, the SPX could barely manage to rally. At best it was up just 3.3% over 5 months.
And since then the SPX has drifted sideways to lower, the third-quarter earnings season now underway failing to really impress anyone. When stock markets fail to react strongly to fantastic news (QE3), and can’t manage to edge to new highs even on good earnings, they are topping. With pretty much everyone interested in buying anytime soon already deployed, the stock markets have simply run out of momentum.
And when buyers are tapped out, it doesn’t take much of a spark to ignite serious selling. And there are lots of potential catalysts on the immediate horizon. Europe’s problems are far from solved, the crises there could flare up again anytime. Meanwhile the global economy, including China, continues to slow. And the upcoming US elections are creating intense uncertainty, with the scary US fiscal cliff looming.
In light of all this, the powerful cyclical stock bull of recent years looks to be topping. Of course that means a cyclical bear is due next. So it is a very dangerous time to get caught up in the complacency, greed, and localized euphoria that marks any major topping. Buying most stocks now is buying high, not the recipe for success. The bull-bear cycles demand extreme caution during any major topping.
Provocatively, the one major proven performer during this secular bear’s past cyclical bears was gold. This metal thrived through both episodes where the SPX was last cut in half, especially during the cyclical bears’ first halves before stock selling grew intense. Just coming out of deeply-oversold territory (http://www.zealllc.com/2012/congfut.htm), gold is looking super-bullish today. So at Zeal we’ve been loading up on cheap gold and silver stocks.
You ought to join us. We publish acclaimed weekly and monthly subscription newsletters that share the highly-profitable fruits of our world-class research. In them I explain what the markets are doing, why, and how to trade them as specific opportunities arise. Our track record is stellar. Since 2001, all 634 stock trades recommended in our newsletters have averaged annualized realized gains of +34.8%. Subscribe today (http://www.zealllc.com/subscribe.htm)!
The bottom line is the strong stock bull of recent years appears to be topping. It is long in the tooth, much older than average. It has also powered far higher than average, driving it up near bull-killing secular-bear resistance. And since stock-market valuations remain way too high to herald the end of this secular bear, it needs to reassert itself. And the recent topping behavior sure looks like this process is starting.
Cyclical bears within secular bears are not to be trifled with, as they mercilessly slash stock prices in half over a couple years or so. But not everything gets sucked into this selling. Gold actually becomes much more attractive during stock bears, an island of strength in a sea of weakness. And gold stocks generally follow gold higher, particularly earlier in stock bears before the selling grows more intense later on.
Adam Hamilton, CPA
So how can you profit from this information? We publish an acclaimed monthly newsletter, Zeal Intelligence , that details exactly what we are doing in terms of actual stock and options trading based on all the lessons we have learned in our market research. Please consider joining us each month for tactical trading details and more in our premium Zeal Intelligence service at … www.zealllc.com/subscribe.htm (http://www.zealllc.com/subscribe.htm)
Questions for Adam? I would be more than happy to address them through my private consulting business. Please visit www.zealllc.com/adam.htm (http://www.zealllc.com/adam.htm) for more information.
Thoughts, comments, or flames? Fire away at zelotes@zealllc.com (zelotes@zealllc.com). Due to my staggering and perpetually increasing e-mail load, I regret that I am not able to respond to comments personally. I will read all messages though and really appreciate your feedback!
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winner69
24-10-2012, 11:01 AM
That's depressing hoop

winner69
24-10-2012, 12:33 PM
Not so ... Them's that don't study history are doomed to repeat it ...

but you have never believed this sort of stuff in the past belg.... secular markets have always been hoop and my discussions with nearly everybody else not believing a word

winner69
24-10-2012, 12:37 PM
Apply all that zeal logic to the chart i put on the ASX All Ords thread a ASX All Ords below 3000 is on the cards ... ouch 33% plus fall

BIRMANBOY
25-10-2012, 08:20 AM
Ok heres a question for someone. When all the money comes pouring/cascading out of the share market...where will it go? Housing too high, property insurance too high for achievable rents, interest rates too low, gold too high...mattress isnt big enough.

fungus pudding
25-10-2012, 08:32 AM
Ok heres a question for someone. When all the money comes pouring/cascading out of the share market...where will it go? Housing too high, property insurance too high for achievable rents, interest rates too low, gold too high...mattress isnt big enough.

No problem to buy two or three extra mattresses.

Hoop
25-10-2012, 09:28 AM
Ok heres a question for someone. When all the money comes pouring/cascading out of the share market...where will it go? Housing too high, property insurance too high for achievable rents, interest rates too low, gold too high...mattress isnt big enough.
Money doesn't pour out of the Market because someone buys the shares being sold ... so its the transfer of monies smart money v dumb money....with an evaporation effect when shares are swapping owners in a downtrend...where is the sale money parked?? ..look for the markets that have reverse correlation with that of the Equity market and those markets will be your answer.