The Next Significant Swing in a Secular Bear Market
From 1990 to 1997, Kevin Haggerty served as Senior Vice President for Equity Trading at Fidelity Capital Markets, Boston, a division of Fidelity Investments. He was responsible for all U.S. institutional Listed, OTC and Option trading in addition to all major Exchange Floor Executions. For a free trial to Kevin’s Daily Trading Report, please click here.
NYSE volume was light yesterday as the SPX had a gap up open, and then went trend down into the 919.21 close (-1.3), while the INDU was down -0.8 to 8871, and the QQQQ down -1.4. The volume ratio was 30 and breadth -1224. The SPX and INDU remain in potential double bottom lows until proven otherwise, while the QQQQ, IWM, and NYA are in potential 123 Higher Bottom/H&S patterns.
The two worst bear markets in post World War 2 were 1973-1974, and 2000-2002, and they were both down about -50%. The current bear market has declined 47%, and is the 3rd worst cyclical decline for that same period. The period from 1966-1982 was a secular bear market, followed by a secular bull market from 1982-2000, and it is now a secular bear market which started in 2000, but will probably not end until 2017-2018.
However, there are significant bull cycle swings within secular bear markets, and there are many indications that we have already started, or are about to start the next cyclical bull swing within a secular bear market, that should run at least +70%. It doesn’t matter whether SPX 840 gets taken out first, or even 769 on a marginal basis, because the next big cyclical upswing will be up, and strong enough for astute investors and intermediate traders to make significant gains.
However, Buy and Hold investors (if there are any left) make little or no gains during secular bear markets, but astute active investors can do quite well. You are in the same secular bear market now, and there has already been a +105% gain from 2002-2007, and you are about to get the second opportunity, so have a game plan. The fear news in the media, and especially the empty suits on CNBC is as bad or worse than it was in 1970 and 1974, and this current market since 2000 closely resembles the 1970’s. The way the Government is printing money,one can’t help think about the possibility of inflation surging and interest rates hitting double figures again like the 1970’s under Carter, but hopefully not before the next cyclical bull swing. Also, contrary to the prevailing deflation/global recession scenario, I think that commodities will surprise to the upside in the next bull cycle swing.
There seems to be no end to the bailout that was jammed down the taxpayers throats, and everyone is now lined up making a case for their handouts with the latest being the automakers $25 billion package that will screw the taxpayers once again, and only benefit investors, unions, and creditors. The Government will not do well running the automakers, and it will be an endless pit for taxpayer money, like most everything else they try to run. They did a real good job screwing up FNM and FRE, which is one of the primary reasons for the current credit crisis. It is also interesting that every state lined up trying to get a piece of the bailout money is controlled by the Democrats. Let the automakers reorganize under Chapter 11, break the unions, and maybe new management can learn how to run their business like our successful foreign competitors.
The SPX futures are at -18.0 points as I complete this at 8:40 A.M. EST so if that holds, and the SPX weakness takes out last week’s 899.74 low day, traders will look for Trap Door reversals. There is also symmetry with the -1.0 Volatility Band at 894
Have a good trading day!
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