Posts Tagged ‘Bear Market’
Year-End/New-Year Indicators: Progress Report
Saturday, January 30th, 2010
An old stock market saw tells us if the month of January is higher, there is a good chance the year will end higher, i.e. the so-called “January Barometer”. On the other hand, every down-January since 1950 has been followed by a new or continuing bear market or a flat year. “As January goes, so goes the year,” said Jeffrey Hirsch (Stock Trader’s Almanac).
The result for January is in, and it is not a good one: The Dow Jones Industrial Index closed 3.5% down on the month and the S&P 500 Index 3.7% lower.
Also, according to Hirsch, the “December Low Indicator” says that should the Dow Jones Industrial Index close below its December low anytime during the first quarter, it is frequently an excellent warning sign. The key number to watch was the low of 10,286 (December 
- now history with the Dow down to 10,067.
Although this is not particularly scientific research, it is clear we are not seeing a good start to 2010 and should at least be mindful of these indicators.
Considering the short-term technical picture of the Nasdaq Composite Index, Adam Hewison (INO.com) provides a short analysis showing a rather negative downside break. Click here to access the presentation. (He also recently analyzed the Dow Jones Industrial Index and the S&P 500 Index. Click here and here.)
Tags: Almanac, Amp, Barometer, Bear Market, Dow Jones, Dow Jones Industrial, Dow Jones Industrial Index, Downside, First Quarter, Good Chance, Jeffrey Hirsch, Key Number, Month Of January, Nasdaq Composite Index, New Year, Progress Report, Stock Market, Stock Trader, Warning Sign, Year End
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Sprott: Is it all just a Ponzi Scheme?
Thursday, December 31st, 2009
Eric Sprott, CEO, and David Franklin, Managing Director, Sprott Asset Management discuss the U.S. Government debt program in their latest instalment of Market Commentary, “Is it just a Ponzi Scheme?.”
Sprott believes the market will overwhelm the Fed’s money printing program, striking at the credibility of the dollar, and this will send the S&P500 below its March 9, 2009 low.
Via Bloomberg:
- The Standard & Poor’s 500 Index will collapse below its March lows as an expected rebound in economic growth fails to materialize, according to hedge fund manager Eric Sprott.
- The Toronto-based money manager, whose Sprott Hedge Fund returned about 496 percent in the past nine years as the S&P 500 lost 32 percent in Canadian dollar terms, said the index’s 66 percent rally since March 9 reflects investors misinterpreting economic data. He’s predicting the gauge will fall 40 percent to below 676.53, the 12-year low reached on March 9.
- “We’re in a bear market that will last 15 or 20 years, and we’ve had nine of them,” Sprott, chief executive officer of Sprott Asset Management LP, which oversees C$4.3 billion ($4.09 billion), said in an interview Dec. 18.
- Sprott said the Federal Reserve has kept bond yields and interest rates artificially low through its program to buy agency debt and mortgage-backed securities. The central bank expects the securities purchase program to finish by the end of March. Expiration of the program would reduce demand for fixed- income securities, forcing up bond yields and interest rates and hurting economic growth, Sprott said. (seeing how that plays out in 2010 will definitely be one of the most interesting development’s of the year)
You can dowload the whole letter, “Is it just a Ponzi Scheme?,” here.
Tags: Bear Market, Bond Yields, Canada, Chief Executive Officer, David Franklin, Debt Program, Dollar Terms, Economic Data, Eric Sprott, Government Debt, Income Securities, Instalment, Lows, Market Commentary, Money Manager, Money Printing, Mortgage Backed Securities, Ponzi Scheme, Printing Program, Sprott Asset Management, Sprott Hedge
Posted in Markets | 4 Comments »
Be mindful of Santa Claus Rally and other year-end/new-year indicators
Friday, December 25th, 2009
If Santa has not yet made his way to your investment portfolio, don’t despair. According to Jeffrey Hirsch (Stock Trader’s Almanac), the “Santa Claus Rally” normally occurs during the last five trading days of a year and the ensuing first two trading sessions of the new year. During this seven-day period stocks historically tend to advance (by 1.5% on average since 1950), but when recording a loss, they frequently trade much lower in the new year. Well, yesterday marked the official beginning of the Santa Claus Rally period, with the Dow Jones Industrial Index off to a 0.5% start.
Another old stock market saw tells us the first five trading days of January sets the course for January (known as the “First Five Days Early Warning System”), and if the month of January is higher, there is a good chance the year will end higher, i.e. the so-called “January Barometer”. Every down January since 1950 has been followed by a new or continuing bear market or a flat year. “As January goes, so goes the year,” said Hirsch.
Lastly, according to Hirsch, the “December Low Indicator“ says that should the Dow Jones Industrial Index close below its December low anytime during the first quarter, it is frequently an excellent warning sign of lower levels ahead. The number to watch is the low of 10,286 recorded by the Dow on December 8.
Time will tell whether the year-end/new-year indicators play out according to the historical pattern. Meanwhile, we’ll have some fun tracking how it pans out.
Tags: Barometer, Bear Market, December 8, Despair, Dow Jones, Dow Jones Industrial, Dow Jones Industrial Index, Early Warning System, First Quarter, Good Chance, Investment Portfolio, Jeffrey Hirsch, Month Of January, New Year, Santa Claus, Stock Market, Stock Trader, Trading Sessions, Warning Sign, Year End
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Keep Your Eyes on the Yield Curve
Thursday, December 24th, 2009
Stocks are trading at or close to 2009 highs, being helped along by a record steepening of the yield curve. Put simply, on Tuesday the gap between 10- and 2-year US government bond yields hit its widest spread ever – 286 basis points, beating last week’s 276 basis points and the previous record set in August 2003 of 274 basis points.
From across the pond, David Fuller (Fullermoney) said: “Veteran subscribers will recall a remark often used on this site [Fullermoney]: Bull markets do not die of old age - to which I will add warnings by Roubiniesque economists. Instead, they are assassinated - usually by central banks. So how many rate bullets does it take to fell a bull? You may not be surprised to hear that there is no precise answer, because it depends mainly on sentiment and liquidity. We know when central banks start to reduce liquidity, or at least increase its price, but we do not know precisely when that will affect sentiment adversely.
“Note the still widening spread between US 10-year yields over 2-year yields, otherwise known as the yield curve, on this historical. It is still rising, indicating to me that quantitative easing continues. The time to start thinking about closing long portfolios in anticipation of the next bear market, I suggest, will be when the yield curve next inverts by moving below zero. However, the lead was so early last time (early 2006) that some of us became complacent about it.”
Source: Fullermoney
Tags: Anticipation, Basis Points, Bear Market, Bond Yields, Bull Markets, Bullets, Central Banks, David Fuller, Economists, Fullermoney, Gap, Government Bond, Inverts, Last Time, liquidity, Portfolios, Precise Answer, Quantitative Easing, Sentiment, Yield Curve
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Barry Ritholtz – still bullish on stocks, but not for the long term
Sunday, December 20th, 2009
“The market’s bias is still to the upside. We’re giving the rally the benefit of the doubt. Innocent until proven guilty,” said Barry Ritholtz, CEO of Fusion IQ in an interview on Yahoo Finance - Tech Ticker.
Ritholtz expects the market to continue to go higher in the first part of 2010, suggesting 1,250-1,300 as an upside target for the S&P 500, but still thinks we are in a cyclical (short-term) bull market within a secular (long-term) bear market, which began in 2000.
“The goal from now until let’s call it 2015 is to preserve capital - see if you can make a little money here or there - but be ready for the next 15-to-20 year bull market,” he said.
Source: Yahoo Finance - Tech Ticker, December 18, 2009.
Tags: Amp, Barry Ritholtz, Bear Market, Benefit Of The Doubt, Bias, Bull Market, Ceo, Fusion, Innocent, Iq, Money, Rally, Stocks, Target, Ticker, Yahoo, Yahoo Finance
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Albert Edwards: “The equity bear market is not over.”
Thursday, December 10th, 2009
“The equity bear market is not over,” writes Albert Edwards, London-based strategist of Société Générale, in an article in the Financial Times.
“The valuation bear market began in 2000 and we have only seen two acts of a far longer and more disturbing play,” says Edwards. “Certainly when I see the current extremely low number of equity bears [the lowest as measured by Investors Intelligence since the market top of 2007], the likelihood is that the next leg of the long-term structural valuation bear market is closer than people realize.”
Source: The Big Picture, December 9, 2009.
Edwards highlights that, in terms of technical analysis, “the S&P is stuck close to its 50 per cent retracement level from the October 2007 peak. In addition, key indicators such as the relative strength index have been weakening on poor volume throughout the second-half rally, suggesting a lack of strong technical underpinnings.”
He also mentions that the “topping out of some key US leading indicators may signal the top of the equity rally is close” and concludes that “markets will march to a very different drumbeat next year”.
Tags: Acts, Advertisement, Amp, Bear Market, Bears, Big Picture, Drumbeat, Edwards, Financial Times, Investors Intelligence, Leading Indicators, Likelihood, London, People Picture, Poor Volume, Rally, Relative Strength Index, Second Half, Societe Generale, Strategist, Technical Underpinnings
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“Money is made in the buying”
Tuesday, December 8th, 2009
Referring to the lofty valuations of the US benchmark indices, the quote du jour today comes from Richard Russell, 85-year-old author of the Dow Theory Letters. He said: “Long-term profits depend largely on your original buy price. Today, as I write, stock valuations are extremely high. For instance, the price-earnings (PE) ratio for the Dow is now 18.02. The dividend yield for the Dow is a thin 2.67%. For the S&P 500 the PE is 86.20; the dividend yield is a mini 1.96%. In the face of these valuations, the odds of building impressive profits over the next decade are very poor (unless, of course, there’s a crash and a new bull market).
“The great fortunes in stocks are made by buying stocks at true bear market lows. At today’s bloated values, profits in stock over the coming decade will probably not be any better than the percentage increase (if any) in the GDP over the same time period.”
What can one expect as far as future returns are concerned?
A good way of looking at valuation levels, and cutting through the uncertainty of having to forecast earnings, is by means of Robert Shiller’s cyclically adjusted price-earnings ratio (CAPE), effectively muting the impact of the business cycle by averaging ten years of earnings. Using rolling ten-year reported earnings, my research (based on Shiller’s methodology, but including some refinements) shows that the “normalized” PE ratio of the S&P 500 Index is currently 20.4. This compares with a long-term average of 16.4 and implies an overvaluation of 24%. The graph below show data since 1950, but the actual calculations date back to 1871.
As a next step, the PEs and the corresponding ten-year forward real returns were grouped in five quintiles (i.e. 20% intervals) as shown below.
The cheapest quintile had an average PE of 8.5 with an average ten-year forward real return of 11,0% per annum, whereas the most expensive quintile had an average PE of 22.6 with an average ten-year forward real return of only 3.1% per annum.
Based on the above, with the S&P 500 Index’s current ten-year normalized PE of 20.4, investors should be aware of the fact that the Index is by historical standards in expensive territory. As far as the stock market in general is concerned, this argues for unexciting long-term returns for quite a number of years to come, providing support for Richard Russell’s statement above.
Tags: Bear Market, Benchmark, Business Cycle, Buying Stocks, Dividend Yield, Dow Theory Letters, Fortunes, Future Returns, Intervals, Lows, Pe Ratio, Percentage Increase, Price Earnings Ratio, Quintile, Richard Russell, Robert Shiller, Same Time Period, Stock Valuations, Term Profits, Valuation Levels
Posted in Markets | 1 Comment »
David Rosenberg: These Belong in Ripley’s
Tuesday, November 10th, 2009
Ahead of a record week of new government supply in the U.S., the demand for the 3-year Treasury note at yesterday’s auction was unbelievable. It drew a 1.40% yield, which was 3bps through the auction bid deadline level. And indirect bidding also took up 68.6% of the auction, which in part reflects a very healthy foreign central bank appetite for Uncle Sam’s obligations.
At the same time, gold, the antithesis of U.S. government credit quality, shot up to yet a new record high. Then we have the equity market, which, despite ongoing contractions in credit and employment, is approaching its bear-market-rally highs (in fact, the Dow has already accomplished that). But the rub remains that these distribution sessions where the gains are exaggerated by light volume (barely over a billion shares on the Big Board? Are you kidding? After a 16.6% plunge on Friday, volume in yesterday’s session was still far below normal and the second lowest in the past two weeks). This is a sign that conviction over the current rally remains unusually light.
The U.S. dollar traded down to a 15-month low, which may help partly explain the continued run-up in gold, though bullion is in a bull run against most currencies; and the weak dollar is widely considered as the genesis for the ‘carry trade’ rally in risk assets, though many countries outside the U.S.A. also have their funding costs near zero. It would seem that investors are optimistic on the future insofar as governments and central banks around the globe are going to damn-the-torpedoes-and-go-full-steam ahead and act as the consumer of first and last resort for their economies. The fact that the U.S. government, at a time when the deficit/GDP ratio is already at record levels of 10%, feels compelled to:
• Extend jobless benefits for up to two years (why not just put these folks on the government payroll? At least the unemployment rate will start to go down).
- Expand the homeowner tax credit.
- Provide tax breaks to homebuilders (the ones who helped get us in to this mess).
- Provide businesses with tax credits for new hires.
- And bump up social security payments once again.
All this really attests to how rotten things are beneath the surface. No doubt that all the government stimulus is going to provide some impetus to corporate profits, but what exactly is the fair-value P/E multiple in a period of state capitalism is a legitimate question.
Tags: Auction Bid, Bear Market, Bullion, Carry Trade, Central Banks, Contractions, Credit Quality, David Rosenberg, Gdp Ratio, Gold, Gold Bullion, Government Credit, Government Payroll, Government Supply, Jobless Benefits, Light Volume, Market Rally, Time Gold, Torpedoes, Unemployment Rate, Weak Dollar, Year Treasury Note
Posted in Gold, Markets | No Comments »
Prechter: Wall St. Setting Investors Up
Friday, November 6th, 2009
Robert Prechter, Elliott Wave Theorist, tells Yahoo TechTicker:
“Everybody who’s saying ‘buy stocks’ today or ‘buy real estate’ is, I think, setting up people to get really hurt,” says Prechter, who believes the bear market rally is reaching a major top.
“We had a great opportunity at [S&P] 667 - that was the big opportunity,” says Prechter, who did make a bullish call last February. “The market is up 60% [from the March lows]. There’s no way the S&P is going up 60% from here.”
Watch the video here:
Source: Yahoo TechTicker
Tags: Bear Market, Buy Stocks, Commodities, Elliott Wave Theorist, Investors, Lows, Market Rally, Opportunity, People, Real Estate, Robert Prechter, Yahoo
Posted in Markets | No Comments »
Chart of the Day: Stock market rally long in the tooth
Monday, November 2nd, 2009
How does the stock market rally since the March 9 low compare with the 1929-1932 bear market - which also included bank failures, bankruptcies, severe stock market declines, etc.?
For some perspective, Chart of the Day provided the graph below, illustrating the duration (calendar days) and magnitude (percentage gain) of all significant Dow Jones Industrial Index rallies during the 1929-1932 bear market (solid blue dots).
As the chart shows, the duration and magnitude of the March 2009 rally of the Dow (hollow blue dot labeled “you are here”) are longer than any that occurred during the 1929-1932 bear market. Add an ugly technical picture and stretched valuations, and it is not difficult to conclude that it is prudent to be on the sidelines at the moment.
Source: Chart of the Day, October 30, 2009.
Tags: Bank Failures, Bankruptcies, Bear Market, Blue Dot, Blue Dots, Calendar Days, Dow Index, Dow Jones, Dow Jones Industrial Index, Duration, Graph, Magnitude, Market Rally, Percentage Gain, Perspective, Rallies, Sidelines, Source Chart, Stock Market Declines, Ugly, Valuations
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What do you think? Bull or Bear Rally? Inflation or Deflation?
Thursday, October 22nd, 2009
Please participate in this AdvisorAnalyst Poll -
Are we in the midst of a bull market rally or bear market rally?
What do you believe is Canada’s immediate economic risk?
When the Poll is complete it will remain published on the right hand side of sites pages.
Poll
-
Are we in a “Bull Market Rally” or a “Bear Market” Rally?
- Bear Market Rally (66.0%, 258 Votes)
- Bull Market Rally (34.0%, 133 Votes)
Total Voters: 391
Loading …
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What is the immediate economic risk in Canada?
- Deflation (65.0%, 219 Votes)
- Inflation (35.0%, 119 Votes)
Total Voters: 338
Loading …
Tags: Bear Market, Bull Bear, Canada, Economic Risk, inflation, Market Rally, Midst, Poll
Posted in Markets | 4 Comments »
Barton Biggs: Better a Pig, than a Bull or a Bear
Saturday, October 10th, 2009
Barton Biggs visits CNBC to discuss the market - Biggs says its better to be a pig in this market, rather than a bull or a bear. Funny thing is Biggs didn’t get to talk about this with Faber - instead they got down to the subject that there is more left in this rebound than investors imagine. The reference to being a pig comes from Biggs’ letters and a recent Newsweek article:
Biggs’ research looked back at past secular bear markets. Investors in past bear markets experienced an average drop from peak of 57% and a recovery from the trough of 78%. In some cases the recoveries from trough were in the 80 and 90 percent ranges. He pointed out further that this time around the drop from peak was 57%, and so far the recovery rally has provided a recovery of 45% out of the trough, hence his optimism that we may be only about halfway to the top of this market rally.
Click play to watch:
Biggs believes there are strong opportunities left in Big Cap Technology, Pharma, and Oil Services - and he believes that China markets will rally strongly again in the 4th quarter, after a lull that began in Mid-June, and emerging markets in general.
“It takes courage to hold fast and be a pig, as they say on Wall Street—my money is where my mouth is.” - Barton Biggs
Biggs thinks we are only half way through this rally:
The market is only about halfway through what is historically typical of a bear-market recovery—and this time around, the rebound is likely to be even bigger, said Barton Biggs of Traxis Partners.
Traxis analyzed 14 past bear markets—ranging from gold to US stocks—and found that when markets dipped more than 40 percent, the average rally off the lows was about 72 percent, he said.
Since the Dow is up only about 45 percent and the S&P about 52 percent, the market still has a lot of room to the upside, Biggs said.
“We’ve had a tremendous, an unbelievable decline in both the economy and the stock market, and so I just think we’re going to have a bigger than normal bounce,” Biggs said. “I just think we’ve got further to go.”
Tags: 4th Quarter, Amp, Barton Biggs, Bear Market, Bear Markets, Bounce, Cap Technology, China, China Markets, Cnbc, Courage, Decline, Dow, Economy, Emerging Markets, Faber, Funny Thing, Gold, Lot, Lows, Lull, Market Rally, Newsweek, Newsweek Article, oil, Oil Services, Optimism, Pig, Rally, Rebound, Stock Market, Stocks, Traxis Partners, Trough, Wall Street
Posted in Emerging Markets, Gold, Markets | No Comments »
