Tell me what you think

[jjj000]

Let me just point one thing out that seems to be getting overlooked here --- IT'S NOT 1930!!! 

The trading landscape of 2008 is magnitudes different than it was 75 years ago.  It is not likely to behave the same.  And I don't think you can even compare this crash to the NASDAQ in 2000 simply b/c of the relative infancy of that exchange, the trading volumes, and the volatility of the components of that average, when compared to the DOW.

I don't think you can even really compare the '29-'32 DOW crash to the '00-'02 NASDAQ either.  '29 - '32 had SIX... count 'em... SIX mindblowing, wealth-erasing drops of 25-50% in the market over that 3 year period.  1932 being the worst of them.  3 years of MISERY.  While the NASDAQ had but 2 drops of that same magnitude or greater in only 2 years (maybe 3 drops if you count the May '01 bounce/drop).

I wouldn't object to extrapolating from the NASDAQ to the oil/commodities sector drop, though... that sounds reasonable to me, as their can be many similarities drawn between the two.  Future will tell, though.

But if we're strictly talking 2008-2010 DOW, and how it will behave going forward... I say toss out all the past charts and just try to stay on your toes...

[davidslane]

The bear market of the 1930's started in 1929 and ended after WWII, lasting around 16 years.

The bear market of the 1970's started in 1968 and lasted 14 years, give or take.


The current bear market started in 2000.
I expect it to last at least 12 years.

Considering we are 8 years into this bear market, history suggests we should not be seeing new lows at this point in the bear market cycle.


To counter JDH, I don't think we're in 1930 or 31.  I think we're closer to the 1937 low retest (or the 1974 low retest).




On a side note, the AP has a news story saying that XMas sales are surpassing expectations for Black Friday.

This is the news that will help keep the market moving to the 200 DMA going into April.
Consumers stopped spending money in Sept - Nov so they could save for December.
Now they'll spend, especially those 90% who still have jobs.


Enjoy the ride back up --- we've earned it.


Oh, and load up on gold and silver stocks, they have the most to go back up (based on stocks that will go back up).

I like these way better than any uranium stock I can find.

[jjj000]

The bear market of the 1930's started in 1929 and ended after WWII, lasting around 16 years.

The bear market of the 1970's started in 1968 and lasted 14 years, give or take.


The current bear market started in 2000.
I expect it to last at least 12 years.

Considering we are 8 years into this bear market, history suggests we should not be seeing new lows at this point in the bear market cycle.


To counter JDH, I don't think we're in 1930 or 31.  I think we're closer to the 1937 low retest (or the 1974 low retest).

Nice illustration, david.  I see precisely what you are saying.

I would personally wouldn't call those time periods "bear markets"...  but I may just have the terminology wrong.  I would consider them more range-bound sideways markets during those stretches... but I suppose that's all just semantics and my way is much harder to say   Your point remains valid --- an early low established in the cycle and retested over a 10-15 year period, followed by a wicked 15-20 year bull charge.

On a side note, the AP has a news story saying that XMas sales are surpassing expectations for Black Friday.

Well you know me, dsl - I can't agree with everything ever   I think these reports are -VERY- preliminary.  I think stores were more aggressive this year - opened sooner, discounted more, some even started Thursday - so who knows what those numbers are based on comparatively to last year.  We'll have to see the follow through over the next two weeks to get a real sense of things.

Though I suspect there will be another upsurge on Monday, and media will more than likely attribute it to this news.  I suspect profit taking will quickly kick in, though, rather than get us going back up to the 200DMA.

Now, if we were to somehow get up past 9650 this upcoming week, then we should continue to fly.  But that's a big 10% gain in this market that I just don't see happening.

Hope I am wrong for the sake of those betting long...

[davidslane]

http://biz.yahoo.com/ap/081130/holiday_shopping.html
(excerpts below)

CHICAGO (AP) -- The holiday shopping season got off to a surprisingly solid start, according to data released Saturday by a research firm. But the sales boost during the post-Thanksgiving shopathon came at the expense of profits as the nation's retailers had to slash prices to attract the crowds in a season that is expected to be the weakest in decades.

Sales during the day after Thanksgiving rose 3 percent to $10.6 billion, according to preliminary figures released Saturday by ShopperTrak RCT Corp., a Chicago-based research firm that tracks sales at more than 50,000 retail outlets. Last year, shoppers spent about $10.3 billion on the day after Thanksgiving, dubbed Black Friday because it was historically the sales-packed day when retailers would become profitable for the year.

While it isn't a predictor of overall holiday season sales, Black Friday is an important barometer of people's willingness to spend during the holidays. Last year, it was the biggest sales generator of the season while the Thanksgiving shopping weekend of Friday through Sunday accounted for about 10 percent of overall holiday sales.

If bear markets reflect a decrease in P/E values and bull markets reflect an increase in P/E's, then the period of 1929 to 1945 and then 1968 to 1982 reflect BEAR markets.

What jjj000 says is a lateral movement is considered bear markets.
Bull markets typically last 16 to 18 years and bear markets 12 to 14.

They go in cycles and you can see them on charts dating back to the 1850's.




The 5 day in a row up move we saw last week+ was the first such move since the summer of 2007.

Last week's percentage move up was the best since 1933.


We won't go up everyday.

And since we typically go up the morning's of the first day of the month, I would expect an explosive start to Monday followed by a big profit taking sell off by mid day which will lead to a consolidation week.

And then we'll go up again.

The trend is up ---- a bull market rally within an overall bear market which will last at least to 2012.

[maxine]

Do any of these long term charts take into consideration what inflation has done to the dollar value over the years and does that matter?  I have been told that 5 cents would buy enough cold cuts for a family meal in the 30's.  5 cents today buys nothing.  The same cold cuts probably cost 3 or 4 dollars today. I'm trying to get my head around how everything fits in relatively speaking.

[davidslane]

When you add in inflation and the devaluing of the US dollar, those straight, consolidating periods that jjj000 said didn't look like bear markets (the 30's and the 70's) because they didn't go down, will all of a sudden look like big fat downward price channels.

But inflation makes them go sideways instead of down.

[sunseeker]

$10, 000 invested in the DJIA in Oct. 1929, would have only been worth $3,600 in Dec. 1935.
 
http://www.gold-eagle.com/editorials/great_crash.html

It has been quite rightly pointed out that it’s 2008, and not 1929. Never the less it was the bear market of 1929 when the banks failed in numbers. In the bear markets since investors have jumped into the banking sector for safety. Also this time the outcome has less to do with what the US does or does not do, and more to do with how other countries react to what the US does, or does not do. At the moment other counties are not feeling too comfortable holding dollars, and banks are none too eager to lend. That is what is going to make this bear market a different animal.

In the interests of self preservation I think that I will remain a pessimist a while longer yet.   

[richmanch]

I've been considering the depressing, early 1930's chart posted by JDH.
I think I have what is (the perhaps obvious) answer.

The chart does not indicate that 1929 was a huge bubble. The DJIA had gone up about 400% in five years. (Therefore,  2007=1929, the basic premise of the analogy, is not valid). The markets "simply" corrected in the early 1930's, and then sharply, briefly overcorrected. Then they recovered and went back to trend.

And if you're going to choose highs and lows to make a case for optimism and pessimism, you could just as easily say that if you bought in 1932, you could have realized a 500% return inside of five years.

I conclude that we could possibly see an overcorrection downdraft into the 6's or 5's, but that will be prove a very good time to put all remaining cash to work, no questions asked, and no worries about threading the needle at the precise bottom.

[JDH]

richmanch, you are correct, 1929 was the peak of the bubble.  Of course it could be argued that the same was true in 2007, although the DOW had only doubled from the lows of 2002, not gone up 400% over the past five years as in 1929.

I do agree with your conclusion, however: cash is king.  I still believe we have room to move on the downside, but if I'm wrong, cash isn't a bad thing.

[Croaker]

Predictions, Predictions, Predictions...  Here we go again. LOL!! 

Let me dust off my Crystal Ball, Dry out my Fairy Powder, and untie my Bag of Bones (not my wife) .

Well JDH, the lambashing is a good indication that there are some proud Americans as well as Canadians and we like to show our colors when the right topic comes up.

As for Obama being the change we need.  You and alot of people may be right, but for different reasons.
Some good and some Bad.

I look forward to you email address.

[jjj000]

Predictions??  Why even bother??  If anyone gets it right it will be by blind luck   6 months out is way too far to predict in today's market.  I see no point in even trying... heh... sorry JDH...

The market swings over the past week behaved so beautifully, they were textbook trend resolutions all the way up and down.  The only predictions I will bother even trying to make will be based on current channel and trend movements, which I'll post in the weekly threads.  Anything else, well, seems to be a bit like hunting in the dark...

Company fundamentals, currency valuations, GDP, employment numbers, commodity prices... they're all cooked.  "Fair value" is a completely subjective, manufactured concept.  You can't judge the fair value of something when the unit you are valuating it by is completely arbitrary and manipulated.  So for me, the only thing that remains is TA in terms of short term trend resolution...

Don't even get me started about the auto bailout lunacy.  It's just absurd and surreal and maddening to read about these painfully typical idiot CEO's promising the idiot congressmen that "we are focused" and "working diligently to fix the issues".  It's the same empty CEO-speak 101 you hear come out of any corporate ass at any company any size... it's complete full of BS pandering nonsense that we've all heard 100 times before... usually right before the company goes out of business and we all get laid off...

OK, I'm done... sorry

[jjj000]

When you add in inflation and the devaluing of the US dollar, those straight, consolidating periods that jjj000 said didn't look like bear markets (the 30's and the 70's) because they didn't go down, will all of a sudden look like big fat downward price channels.

But inflation makes them go sideways instead of down.

david... I don't buy this argument.  If this were the case, then inflation/devaluation would make the BULL markets look flat or down as well... no??  Which would mean we haven't had a true bull market since '42-'65.

Either way, it's all semantics, the point is you can make money anywhere.  How much that money buys you outside the market is a different story

[pinetree]

Sorry JDH, I won't be making any predictions either.  The only prediction for next year that I feel comfortable making is that it will be Celtics-Lakers again in the NBA Finals.

In this crazy market I haven't been giving any thought to where anything will be 6-12 months from now.  I have no clue anyway.  For now I'm only concerned with getting a handle on the short term moves.

Whenever this mess blows over and things go back to normal I'll start taking a slightly longer time horizon.  Until then it's hours and days, not weeks and months.

[punter]

Hi JDH, I do believe that capital losses can be held indefinatley in Canada. Unfortunatley tax loss selling is only beneficial when you have gains to claim against. I'm sure you already know that you will not get cash back for claimed losses. If you have signifigant capital gains to book this year, WOW !!! I don't , that's for sure. Another distraction in Canada is that owing taxable income from investments of more than $2000.00 for two consequtive years kick starts mandatory quarterly payments based on the past years tax filing. This means that you have to continue to pay quarterly on income you may not be generating for an additional tax year and having to wait to claim it back. You cannot stop paying them either or you run the risk of bad dealings with THE MAN. Talk to a CA about this though, mine seems to know his biz but it's always best to do your own DD.

George Ure today relates a story about a friend of his who is trying to take delivery of bullion from the COMEX and is having difficulty doing so. URBANSURVIVAL. COM

I agree with your read on metals, I have a position myself and am trying to begin adding more. The macro is compelling. Many disagree, I think that capitulation is upon us. The contango current in the physical/spot market is telling me something, ie; no one wants to sell.

[Uboat]

Presently, I am with jjj000 and pinetree on “hours and days” in this market.
 
But there will be a tomorrow, so why not speculate on the future like astrologers and horoscopes at least until the first quarter of 2009, subject to weekly reviews:

For the next months I expect gold, uranium, oil and most commodities to follow the lead of the Dow and S&P in tandem, mainly up until January and down again from February until April.
There could be an international crisis and test of Obama which would give oil a lasting and the dollar a temporary lift. Gold should benefit from a subsequent decline in the dollar.