Bear Market Perspective
9/30/2008 8:43:50 AM
Here's a special update on our view on the current market.
I'm a big picture kind of guy. The action this week has caused a lot of talk about the current state of the markets being so terrible. But I like to put things in perspective. Here's is my 'Big Picture' chart:
This chart looks at about 15 years worth of monthly data. As we approach the end of a month here, we're seeing somewhat of a symmetrical pattern developing. This most recent bear market is mimmicking the 2000-2002 bear market in angle.
The markets are at a point where they're ready to bounce. This move lower was right down to the trend and there's plenty of room for a bounce higher.
That being said, I'm not bullish. I know markets oscillate. They oscillate sideways, higher and lower. This is a lower oscillation (i.e. bear market). Could we go down to 800 again on the S&P? Sure, but not until after some sort of a bounce.
Will the markets spend a significant amount of time below the RSI 50 level? Sure - even with a bounce, the likelihood of the RSI to get above 50 is very low. But that could be a bounce that sustains itself into December...
Something to think about. The markets are not going away. They may go through an extended bear market as we saw back in 2000. But they'll recover. If you're about to retire, then you should have less exposure to stocks. If you're not retiring for 10 or 20 years, you sould see this as an opportunity. The market is full of opportunities every day, just don't get greedy - as we're seeing the impact of that greed in the ashes of companies that were once great.
Watch these markets very closely, learn from them - as the lessons in the market get repeated day after day, month after month and year after year. And the more you learn from them now, the more you can profit from them in the future.