No bottom in sight for this bear market–it’s just the beginning?

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I have written a number of times that one can ignore the fundamentals and all of the media pundits and just let the market tell us what it is likely to do.   When you are crossing the street and a truck comes bearing down on you at high speed, you should not argue with the fact that it is there.   You should not wait in the street for the truck to stop and/or exclaim incredulously that it should not be there.   One needs to move quickly and get out of the way or jump on board the truck,   if that is the goal.

I have been in cash for all of the major declines since 1995.   (I also avoided the 1987 debacle.) I have never been caught married to my long positions,   arguing with the market or hoping that a decline will end.   No one can detect a bottom until sometime after it has occurred.   Why do people look to experts to predict the market when none of them predicted the current decline!   Experts are really great at explaining to us after the fact, all of the reasons why the market declined.   When someone can tell me the reasons before the decline occurs, then I will listen.

So, what can the market tell us about how bear markets have ended?   I showed you several posts ago that the current market is tracking somewhere between the 1929-1932 and 1974 bear markets.   How did these huge declines end?   It turns out that they showed amazingly similar characteristics.  

Read moreNo bottom in sight for this bear market–it’s just the beginning?

Comparison of Current Bear to Bear Markets of 1929, 1973-74, 1987 suggests Dow 3,500 possible

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I am getting tired of listening to all of the pundits saying that the current decline resembles the 1974 bear or the 1987 bear markets.   How about looking at some data!   So, I used my TC2007 market price history database to compute how much the Dow Jones Industrial average declined in prior bear markets after the market’s peak.

The results, presented in the table below, are quite revealing and unsettling if one is looking for a near term bottom.   I would be interested to learn if you agree with my analysis.

Twenty days after the Dow had peaked, the Dow   was down 7-10% in each of these beginning bear markets. By 40 days post Dow peak, the 1987 decline had already bottomed out (-41% by day 39) and rebounded to -26%.   The ferocity of the 1929 bear was evident early on, showing a 40% decline by day 40.   In comparison, the 1973 and 2007 bears appear puny, registering only 4% to 8% declines by day 40.   The 1973 and 2007 bears tracked each other quite closely until 260 days post the Dow peak.   By day 260, the 2007 bear was actually showing a greater than the decline that started in 1929 (-40% vs. -38%) and was more than twice the decline shown in the 1973 bear market (-17%). Since day 260,   the current bear market has resembled the 1929 bear market closely, with declines being about 14 percentage points smaller.   I would conclude then, that the current bear market is tracking much closer to the one that began in 1929 than to the 1973 and 1987 bears.

Read moreComparison of Current Bear to Bear Markets of 1929, 1973-74, 1987 suggests Dow 3,500 possible

Jim Cramer finds (TA) religion; TSYS: cup with handle breakout? Indexes are weak, but some promising IBD100 stocks appear

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I know that the GMI has kept me and, I hope others, out of the long side of this market since at least August 2008, the last time that the GMI was 4.   I prefer the GMI to be at least 4 before I commit many IRA funds, and especially my university pension,   to the long side.   Since the GMI fell below 4 in late August, the QQQQ (Nasdaq100) and SPY(S&P 500) have declined 35%, and the DIA (Dow 30), by 31%.   During that same time period, 95% of the Nasdaq 100 stocks declined, 36% have declined more than 40%.   The biggest losers in the Nasdaq100 component stocks includes such well respected stocks as: RIMM, ISRG, and DELL (each down 63%), and JOYG (-69%)   and WYNN (-72%). As to   the “safe, buy and hold” Dow 30 stocks; 100% declined in this period, with whopping declines in: AXP (-58%), GE (-60%), GM (-75%), AA (-76%), C (-80%) and BAC (-81%).   Do you see why it does not make sense to fight the general market’s trend, as reflected in the GMI!

Speaking of the GMI, the table below shows

Read moreJim Cramer finds (TA) religion; TSYS: cup with handle breakout? Indexes are weak, but some promising IBD100 stocks appear

The new 3x ETF’s–triple your pleasure — or pain

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As you know, when I try to trade the trend of the QQQQ, I buy QLD (ultra long) or QID (ultra short) ETF’s.   These ultra   ETF’s are designed to move twice as much as the underlying index they track.   Well, less well known is that there now exist 3x ETF’s, designed to move three times as much as the underlying index. I knew about the recent emergence of these Direxion ETF’s, but was surprised to see how quickly they have caught on.   I have now located 16 of them, and 8 of them traded more than one million   shares each on the NYSE on Friday.   Here are the ones I have found.   Bull ETF’s: FAS, BGU, TNA, ERX, EDC, MWJ, TYH, and DZK.   Bear ETF’s: FAZ, BGZ, TZA, ERY, EDZ, MWN, TYP, DPK .   One can even trade options on most of these!   Remember, the leverage works both ways, they aim to go up or down at 3x the speed of the relevant index.   Still, if I have a good idea of the trend, these ETF’s may prove better than going to the casino and putting everything on black or red………..

Meanwhile, the GMI

Read moreThe new 3x ETF’s–triple your pleasure — or pain

All indicators negative; 12th day of QQQQ short term down-trend

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All of my indicators have turned negative again and I am back to cash.   I have considered buying some QID, but with my short term moving averages being flat, I will probably get repeatedly whipsawed as the indexes move above and below their averages.   However, at some point a real tradable trend will develop. There were 3 new highs and 138 new lows in my universe of 4,000 stocks on Friday.   Only 30% of the Nasdaq 100 stocks closed above their 30 day averages and the QQQQ   just completed the 12th day of its short term down-trend.

One of the GMI’s components tracks the percentage of “successful” stocks that hit a new high 10 days ago that closed higher today than they closed 10 days ago.   It is a useful indicator to see if break-out stocks are continuing to advance.   This indicator has been negative since late October,   largely because we rarely saw the required 20 new highs in a day.   You can see this indicator is still negative in the GMI table below….

Read moreAll indicators negative; 12th day of QQQQ short term down-trend