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Saturday, May 02, 2009 9:22:53 PM
Amateur Investors Weekend Stock Market Analysis (5/2/09)
http://www.amateur-investor.net/Weekend_Market_Analysis_May_2_09.htm
This week we are going to look at some historical Cyclical Bull and Bear Markets to see which pattern the current Cyclical Bear Market could be mirroring. The chart below shows an Inflation Adjusted S&P Composite from the mid 1890's through 2009 with all of the Cyclical Bull and Bear Markets (I ended the Cyclical Bear Market in 1942 as it made a higher low although one could argue it lasted through the early 1950's). On average the previous three Cyclical Bear Markets lasted from 12 to 14 years.
As you can see we are now in the 4th Cyclical Bear Market since the mid 1890's which have all been preceded by significant Cyclical Bull Markets. Thus once the current Cyclical Bear Market ends this will be followed by another significant Cyclical Bull Market at some point in the future. If the historical pattern repeats itself then this current Cyclical Bear Market would last from 12 to 14 years so if it started in 2000 then that would lead to an end some time in the 2012 -2014 time period unless we see a more prolonged Cyclical Bear Market like Japan has seen which is now in its 20th year.
Meanwhile if we look at the chart patterns of previous Cyclical Bear Markets the current chart in the S&P Composite looks similar to those of the 1906-1920 and 1969-1982 time periods and not of the 1930's to 1940's time frame. The 1930s and 1940s time period developed a longer term Triangle pattern over a period of several years while the 1906-1920 and 1969-1982 patterns took the shape of a corrective ABC type Wave pattern as the C Wave got rather elongated.
Also a few other things to note are that the moves from Waves B to C were nearly a 1.618 Extension of the length from both the 1906 and 1968 Tops to the bottom of Wave A and that it took roughly 9 years for the C Wave to complete after the B Wave finished. If we use the same type of calculation for the current S&P Composite that would produce a longer term price target of around 200 for the end of Wave C if history repeats itself using Inflation Adjusted Data or around 300 using non Inflation Adjusted Data. Also if we use a similar 9 year time frame for Wave C that would mean it wouldn't complete until around 2016 possibly since Wave B peaked in late 2007.
Furthermore what is more interesting is that if you look at a longer term chart of the S&P Composite on a log scale an add some longer term trend lines notice the S&P Composite is still well within its longer term upward channel connecting the 1932 and 1938 Bear Market lows despite a 59% drop since 2000.
In addition if you look at a linear chart notice the longer term trend line is currently near 300 so the S&P 500 could still drop down to that level and not break its longer term up trend which has been in place since the 1932 bottom.
Finally if we are repeating a pattern similar to the 1969 to 1982 Cyclical Bear Market it appears the rally from the early March low is the beginning of a more substantial oversold bounce much like occurred from 1975 through the middle part of 1976 (points X to Y) before the final elongated move to the real Bear Market low occurred in 1982 (points Y to C).
In 2008 our ETF Strategies worked the best with which had a return of +33% versus the S&P 500 which was down -38.5% for the year.
Meanwhile our 401K Strategy finished up +17.3% for the year.
Signup for a "Free 4 Week Trial Membership" or save up to 50% on a Premium Membership and you will have access to these Investment Products which include the following:
1. "ETF Daily Buy and Short Signals" which can be used to trade the DIA's, QQQQ's, SPY's and OIH's. Our ETF Strategy returned 33% in 2008.
2. "401K/Thrift Savings Plan (TSP) Timing Service" which can be used to help improve your return in your 401k/TSP Account which was up +17.3% in 2008.
3. The "End of Month Strategy" finished up +36.3% in 2008. This Strategy focuses on the typical End of Month markup by the Institutional Money.
4. "Stocks to Buy List" which can be used with either our Short Term Strategy or Long Term Strategy. In 2007 our Long Term Strategy finished even for the year versus the S&P 500 which was down -38.5%.
http://www.amateur-investor.net/Weekend_Market_Analysis_May_2_09.htm
This week we are going to look at some historical Cyclical Bull and Bear Markets to see which pattern the current Cyclical Bear Market could be mirroring. The chart below shows an Inflation Adjusted S&P Composite from the mid 1890's through 2009 with all of the Cyclical Bull and Bear Markets (I ended the Cyclical Bear Market in 1942 as it made a higher low although one could argue it lasted through the early 1950's). On average the previous three Cyclical Bear Markets lasted from 12 to 14 years.
As you can see we are now in the 4th Cyclical Bear Market since the mid 1890's which have all been preceded by significant Cyclical Bull Markets. Thus once the current Cyclical Bear Market ends this will be followed by another significant Cyclical Bull Market at some point in the future. If the historical pattern repeats itself then this current Cyclical Bear Market would last from 12 to 14 years so if it started in 2000 then that would lead to an end some time in the 2012 -2014 time period unless we see a more prolonged Cyclical Bear Market like Japan has seen which is now in its 20th year.
Meanwhile if we look at the chart patterns of previous Cyclical Bear Markets the current chart in the S&P Composite looks similar to those of the 1906-1920 and 1969-1982 time periods and not of the 1930's to 1940's time frame. The 1930s and 1940s time period developed a longer term Triangle pattern over a period of several years while the 1906-1920 and 1969-1982 patterns took the shape of a corrective ABC type Wave pattern as the C Wave got rather elongated.
Also a few other things to note are that the moves from Waves B to C were nearly a 1.618 Extension of the length from both the 1906 and 1968 Tops to the bottom of Wave A and that it took roughly 9 years for the C Wave to complete after the B Wave finished. If we use the same type of calculation for the current S&P Composite that would produce a longer term price target of around 200 for the end of Wave C if history repeats itself using Inflation Adjusted Data or around 300 using non Inflation Adjusted Data. Also if we use a similar 9 year time frame for Wave C that would mean it wouldn't complete until around 2016 possibly since Wave B peaked in late 2007.
Furthermore what is more interesting is that if you look at a longer term chart of the S&P Composite on a log scale an add some longer term trend lines notice the S&P Composite is still well within its longer term upward channel connecting the 1932 and 1938 Bear Market lows despite a 59% drop since 2000.
In addition if you look at a linear chart notice the longer term trend line is currently near 300 so the S&P 500 could still drop down to that level and not break its longer term up trend which has been in place since the 1932 bottom.
Finally if we are repeating a pattern similar to the 1969 to 1982 Cyclical Bear Market it appears the rally from the early March low is the beginning of a more substantial oversold bounce much like occurred from 1975 through the middle part of 1976 (points X to Y) before the final elongated move to the real Bear Market low occurred in 1982 (points Y to C).
In 2008 our ETF Strategies worked the best with which had a return of +33% versus the S&P 500 which was down -38.5% for the year.
Meanwhile our 401K Strategy finished up +17.3% for the year.
Signup for a "Free 4 Week Trial Membership" or save up to 50% on a Premium Membership and you will have access to these Investment Products which include the following:
1. "ETF Daily Buy and Short Signals" which can be used to trade the DIA's, QQQQ's, SPY's and OIH's. Our ETF Strategy returned 33% in 2008.
2. "401K/Thrift Savings Plan (TSP) Timing Service" which can be used to help improve your return in your 401k/TSP Account which was up +17.3% in 2008.
3. The "End of Month Strategy" finished up +36.3% in 2008. This Strategy focuses on the typical End of Month markup by the Institutional Money.
4. "Stocks to Buy List" which can be used with either our Short Term Strategy or Long Term Strategy. In 2007 our Long Term Strategy finished even for the year versus the S&P 500 which was down -38.5%.
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