Progress of The Secular Bear Market: Position as of July 31, 2013

By: Michael A. Alexander | Fri, Aug 23, 2013
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The value for R was 1885 on July 31, 2013.


Progress Update on Secular Bear Market

Over the May through July period I gradually shifted out of stocks as the S&P 500 reached the upper 1550-1600 period. I sold by last position last month when the index was in the low 1600's. The P/R graph above shows that the market has reached roughly the same position relative to past secular bear markets as it had in 2007. There is still room to rise and the current bull market will likely run quite a bit longer, particularly as the length of the current business cycle, at least than 6 years, is still quite short. I had made a similar argument in December 2007, and was wrong. So this time I decided to sell as soon as P/R indicates a relatively overvalued market.

The bet I am making is that there will be another downturn as there was in the past and this downturn will send P/R below its previous low of 0.49. If I assume the next downturn will have happened by 2020, seven years from now, I can extrapolate the R growth curve to estimate a value of about 2550 then, which when multiplied by 0.49 gives a value of 1250 for the next bottom, well below today's levels, at which to move back into stocks.

 


 

Michael A. Alexander

Author: Michael A. Alexander

Michael A. Alexander
Stock Cycles

Mike Alexander is the author of four books: (2000) Stock Cycles: Why stocks wont beat money market over the next 20 years; (2002) The Kondratiev Cycle: A generational interpretation; (2003) Retiring Rich: The ultimate IRA and 401(k) investing guide (now available in paperback under the title Investing in a Secular Bear Market) and (2004) Cycles in American Politics: How political, economic and cultural trends have shaped the nation.

Michael is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, we recommend that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

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