Investing strategies and secular bear markets

[Mick100]

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]

How's the dow theory looking Hoop, ie, transports

[winner69]

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]

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]

I found this on the net

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

[Kookaburra]

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]

DOW theory update by Tim Wood

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

,

[Hoop]

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]

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]

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