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Simply put out view is that stocks have made another short term bottom. This patern has persisted throughout the summer. We anticipate a two to three week rally in stocks. Recall that the President is making three major speeches just this week. We have illustrated past fall time periods when the market held up well into Sept and then collapsed.
In 2008 the market had fallen below its 200 day MA, just as it has now. And it had drawn out the summer in slow sideways fashion with the internals weakening. It held up until Seot 22 touching the 200 MA one last time, And then as we draw the analogy, the cookies fell off the tray as hedge funds were savaged with redemption and margin demands.
We expect the decline for the next two years to more closely match the 1972-74 period. If that is the case, 2010 = 1972 when the markets peaked but to the casual observer not much was happening. A two year drawn out bear market followed with the Dow collapsing 50% in two years from 1,000 to 577. There never was a crash, just a slow meltdown. AS a result most had ben lulled to the negativity of the markets and missed the December 1974 low, the best buying opportunity of our lifetimes. We are working on charts for that period using historic data as stockcharts.com does not go back that far.
We took profits in TLT the bond fund. it is now in a parabolic move up and reversed Friday to the downside as stocks enjoyed a significant rally from oversold conditions. Such opposites in bonds and stocks are usually a reliable indicator of a reversal.
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