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looking forward to views
jim birmingham
January 24, 2009 at 10:53 pm
TSG Blog – Home.
oloeru lucia, Press.
Iasi, Romania.
Multumesc
oloeru lucia
January 25, 2009 at 9:52 am
Ya, A recoverying market always begins to ignore the bad news. There are now signs of recovery on the horizon
STOCK MARKET DECLINES, RECESSIONS, RECOVERIES & CHARACTERISTICS
Stock Market Declines
The U.S. stock market peak in this cycle could be defined as October 2007
On average, the U.S. stock market peak to trough is 10-22 months in length. (On average, with the current official declared recession beginning December 2007,
the recession trough would likely be before September, 2009. On average, markets should bottom between April & Sept., 2009
U.S. stock market bottoming process: has been 3-8 months in length since 1970. April to October, 2009.
The total time spent in bear markets has been 31% of the last 107 years.
Risk aversion
Since 1953 the S&P stock market index bottomed 4.1 months prior to recession trough.
Recessions are almost always preceded by:
a) a significant rise in the real funds rate (i.e., an overt tightening of monetary policy), and
b) a significant flattening of the yield curve (which typically confirms that money is tight).
Consumer expectations falling
Industrial Production falling
Interest rates peaking
Yield curve is inverted
Stock Market Recessions
Official Current Recession Declared by National Bureau of Economic Research: Beginning December 2007
Historically, the length of recessions have been:
17 months in length since 1854
14.4 months since 1902 – Average stock market decline -24.2%
22 months since 1929
10.2 months since 1945 – Average stock market decline 34%
During a couple of bear stock markets, no recessions were ever declared.
Consumer Expectations reviving
Industrial production bottoming
Interest Rates falling.
Yield Curve is normal.
Stock Market Recoveries
Stocks and sectors provide some leadership – solid sales and earning growth and the stocks are traded well
U.S. stock Bull markets (from trough/bottom to stock market peak) have averaged 30 months in length since 1900
There have been three long bull markets that lasted 9 years, 10 years, and 15 years 8 months
An average gain of 106% for all bull cycles
An average gain of 46% after one year from the recession trough. If it is a time when all others are fearful, maybe it is time to buy.
Broadening markets (small, mid, and large cap stocks going higher)
Margin debt as a percentage of GDP reaching the historic low range that corresponds to bottoms.
Insiders buying.
Credit flows
The VIX Volatility Index falling
Risk appetite expansion
Early Recovery
Consumer Expectation rising
Industrial Production rising
Interest Rates bottoming
Yield Curve is steep
Recovery
Consumer Expectations decling
Industrial Production is flat
Interest rates are rising
Yield curve is flattening
Sequential Characteristics of Declines, Bottoms, and Recoveries
Concern – Decline of market over long period of time
Fear – Rapid acceleration in the speed of the market fall
Panic – Massive increases in volume and volatility – like convulsive seizures
when 14 of the 64 days where intraday volatility is 8%+ … going back to 1928.
So out of 80 years, over 20% of the most volatile days have come since October 2008
Shake-out – speculators – everyone gives up – no one is saying it is a great time to buy
Capitulation – You won’t know it when you see it.
The idea of capitulation could be costly as investors wait for a bus that never arrives –
best if you are a long term investor 5-10 years
Geniuses are gone
NBER declares recession is here
“Acceptance” stage of grief
Oversold conditions
Market does not go down on bad news: Trust Building/Hope
Stock market volumes are low after a bottom.
Recovery
Average 1 year return after trough/bottom = 46%
Bounces off the bottom can be dramatic.
1973-75: Stocks up 80% within a year.
1982: Stocks up 65% within two years.
1990: Stocks up 60% in next three years; up 200% by 1998.
2002: Dow up in 2003.
Ron Glandt
February 8, 2009 at 12:36 pm
Ron;
Yes, market recoveries stock market peak to trough periods average 10 – 22 months and we could expect the same if this were an average correction. However, I think it is safe to say that although we are in the early stages of this correction it is most certainly not average. Question is, will it turn out to be more serious than the previous two most significant downturns in history – the Great Depression that effectively lasted from 1930 until 1940 and the Japanese malaise that began in 1990 and continues to this day?
From the gist of your post, you appear to be a fundamental investor. While I use fundamentals to a minor degree, I primarily rely on technical and quantitative data – indicators like market breadth (advance-decline), volume, price patterns and other indicators that have proven reliable in providing warnings of potential reversals or consolidations.
I agree with your point that by the time their is verifiable fundamental proof that a recovery is underway, it is long after the fact. The same is true about market meltdowns – by the time there is fundamental proof that the market is has peaked and a bear market has begun, the correction has either finished or is at least well underway.
Another point is that there are often a number of false starts before a sustained recovery is underway. We have yet to have one of those false starts unless you believe we are experiencing one now. History tells me that this is a bear market rally that will eventually reverse and stocks will either stay at depressed levels for an extended period or we will see new lows.
tradesystemguru
February 8, 2009 at 9:04 pm
Matt,
What is the significance of the Dow Jones Transport Index consistently underperforming the other indices?
Thank you.
Karen Carlson
March 2, 2009 at 12:29 am
Karen;
From a sector rotation standpoint, Transports tend to lead the market in rallies (showing an increase in demand for transport services indicates economic strengthening), which is generally positive. However, when transports head lower even in the face of much lower oil prices, it is a concern since this is a sign of weak demand for transportation services to deliver goods to services and therefore bearish.
According to Dow Theory, a trend in the market is considered to be confirmed when both the Dow Transports and Dow Industrials head in the same direction. By early October 2008, Transports had not confirmed the lower low on the Dow Industrials which meant that the trend was in question. Since then however, the Transports have dropped with a vengeance confirmed the downtrend.
Any rally in the Transports in lieu of one by the Industrials will again put the downtrend into question but could be potentially good economic news.
Cheers,
Matt
Matt Blackman
March 2, 2009 at 1:37 am
No Elliot Wave analysis this week! I’m very disappointed.
Wil
March 2, 2009 at 6:55 am
Wil;
I give my take this week in my Financial Forum presentation on the last slide. The link to the PPT was at the bottom on my email notification as well as near the end of the newsletter. If you have any trouble finding it, just email me and I’ll send you the link.
Glad you enjoy it!
Cheers,
Matt
tradesystemguru
March 2, 2009 at 7:22 am
Matt,
Always nice to read you.
You’re elliott wave analysis is good, where can i get more info ?
denis
March 16, 2009 at 3:50 pm
Denis;
Thanks. I use a program for EW called Refined Elliott Trader (RET) produced by Elliottician.com
Not sure what they charge for it these days – I’ve had my version for years…
Cheers.
Matt
tradesystemguru
March 16, 2009 at 3:58 pm
hi matt
williams meesait
June 11, 2009 at 4:52 am
Matt Remember, Goldman Sachs earnings are a result of taxpayer bailout. They now control over 50 % of NYSE trades, and some say they are manipulating the market to their advantage.
When we compare earnings year to year instead of month to month, they are down about 50% from last year.
House prices have dropped back to where they were in 2003. Most people who financed a home since then are underwater, and despite what the Gov’t says, cannot refinance at the lower rates available today because their home is being appraised at today’s value.
We have not seen the end of foreclosures and write-offs.
The American economy is driven by the consumer. Consumers are not spending in this climate.
Unemployment continues to rise, savings are at record highs, consumer spending low.
I doubt that the recession is over.
George
July 20, 2009 at 3:19 am