AGING BULL
By Carl Swenlin, Decision Point
It is a rule-of-thumb that the average bull/bear cycle lasts about four years trough to trough — 2.5 years of bull market followed by 1.5 years of bear market. Like most of these kinds of rules, it is good to keep them in mind, but don’t try to set your watch by them. For example, the last bull market lasted five years, and the bear market that preceded it lasted two years. As it so happens, the last bear market lasted almost 18 months, which makes it fit the template almost exactly.
That doesn’t mean the current bull market will also come in on the average, but we must take note that it is now two years and two months old, and is becoming vulnerable to the law of averages.
The market is also becoming vulnerable to the next six-month period of unfavorable seasonality, which begins at the end of this month.
Bottom Line: The current bull market is getting a bit long of tooth, and the specter of six months of negative seasonality lies just ahead. This is not a happy coincidence, especially combined with the fact that volume has been weak for many months. Our mechanical timing model has us on a buy signal for now, but I would take it quite seriously if that were to change.
If you look at history of secular bear markets (like what the US equity market is currently in), cyclical bull markets usually top out close to the previous high or slightly above.
The graph above is following a classic secular bear market trend.
Although it can be dangerous trying to predict the market, I believe the current US bull market will end sometime in 2013 depenending on what happens with interest rates.(ie approx 4 year bull market)
All things being equal this might be true but “all things are not equal” therefore the graph is meaningless with POMO and QE’s. That did not exist either at all or the the crazy extent it exists today. POMO was at most $2.5 Billion once a month in early 2000′s and only “when needed”. Now it has been $10 billion almost EVERY DAY!!!
My opinion still holds, all TA and all “patterns” are meaningless with FED RES interventions and the bailouts.
Throw in the fact that Bankers can steal and pilfer BILLIONS of dollars and they are fined some $300 million, but the online casinos may get “millions of dollars” in ill gotten booty, they are FINED $3 BILLION!!!
The criminals on Wall and Broad need to go to jail, and the FED RES needs to go away, then we can TRY to get back to some semblance of a “FREE MARKET.
Til then, nothing else matters.
Decision point is giving perspective not a tradeable idea.
From the “Kitchen Table” Wk-End update 4/16/2011
This week is about “Speculative Confidence”
Bond/Bond confidence ratio: Has given a CAUTION signal–
The Ratio’s Intermediate-Term Momentum peaked in early March ++
The Ratio is sitting on its Intermediate-Term Trend Line
A probable Break – May/Might occur in the next couple of WKS
Confirming the “Risk off” trade.
Stock/Stock “Speculative” Confidence: Has given a “Risk Off” signal
This Ratio is based on the correlations of the Log Price of an “Unweighted Technology Index” and Log Price of an “Unweighted Consumer Staples index”
The Ratio is then Smoothed with an EMA–.075 smoothing constant
Buy and Sell signals derived by penetration and direction of the EMA along with traditional trend line breaks.
This ratio refects the movement of Buying Power between these two categories of stocks
Consequently: “EYE’S Wide” when the “Consumer Staples(DEFENSIVE)Index” is outperforming the “Technology index”
These are Ideas for further study and i’m certain improvements can be made in the technique.
No Warranty is given!
No recommendations to buy or sell securities
All the Best
AWF
From 2003 – 2008 we had the housing bubble injecting tens of billions per week into the economy – far more than QE1 and QE2 combined.
If QE is going to get us back above the 2007 peak then QE3 will need to be far larger than QE1 and QE2 combined.
Probably not going to happen until after the coming stumble.
Well since QEx doesnt really achieve anything, Im going to vote for tax reform and reductions starting from the bottom quartile.
That will help BS restructuring and deleveraging.
Combine that with a reduction in government waste to offset the tax cuts and all should start coming right.
Subjectively predicting the market or a particular investment is what gets most people into trouble. Your chart shows the 50- and 200-day moving averages and their crossover points. Those seem to be as good an indicator of what the market is doing as anything and serve as decent market timing action indicators.
Remember that the “ZIRP” was also not factored in the 1990s. We have had ZIRP for far too long and it needs to end ans well as monetary intervention of any sort and let the market stabilize by finding the “winners and losers” on market principals, not some over educated “economist” that bases nothing on reality.
The losers should be the banks that made high risk loans and they went bad. Sorry, that is stupid risk taking. Same for the financial houses that made the MBS and CDOs. Those idiots need to lose everything they have for making such a diabolical investment vehicle as well as the rest of the “derivatives trade”. As for those that made these vehicles then sold them and shorted them ,… death.