Imminent and severe market correction

[treefrog]

a helicopter view:

Carl Swenlin | DecisionPoint
CHANGING WITH THE MARKET
When the market changes, we must change our tactics, strategies, and analysis techniques to accommodate the new market conditions. This is not a new idea, but it is one that is not very widely recognized, particularly when applied to the long-term. In recent writings I have emphasized that we are in a bear market, and that we must play by bear market rules. Overbought conditions will usually signal a price tops, and oversold conditions can often see prices slip lower to even more oversold conditions. When making these comments, my focus has been on the cyclical bull and bear markets. What I want to address in this article are the secular forces of which we must be aware.
On the chart below I have identified the five secular trends that have occurred in the last 80-plus years. First is the 1929-1932 Bear Market, which, although it was short, saw the market decline 90%. Next was a secular bull market that lasted from 1932 to 1966, which overlaps with the consolidation of the 1960s an 1970s. In the early 1980s another secular bull market began which peaked in 2000 (basis the S&P 500). Finally, we seem to have entered another consolidation phase that could last another 10 to 15 years.
I began my market studies in the early 1980s, before the big bull market took off, and I learned from the guys who learned all they knew from the market action of the 1960s and 1970s. Applying those rules to the new bull market was confusing, frustrating, and unprofitable. While I didn't participate in those markets, it is easy to imagine the bewilderment of those who, educated in the bull market of the 1920s, took the elevator all the way down to the basement starting in 1929.
The long bull market after the 1932 bottom was missed by most of those traumatized by the crash, but it trained a whole new group of analysts who learned that the market always goes up . . . until everything they knew was proven wrong by a 20-year consolidation. Finally, the battle cry of the 1980s and 1990s bull, "this time it's different," was learned well by those who ultimately ate the 50% decline of 2000-2002.
Unfortunately, it takes time to unlearn the lessons of the heady 1980s and 1990s, and we can still observe people using bogus valuation models that only work in bull markets. We still see people trying to pick bottoms, and we still see people who think that a stock is under valued because it is down 70%. By the time this current secular market phase is over, people will have learned all new rules, that will not apply to the next 20 years.
Whether or not I have correctly identified the current secular market phase as a consolidation remains to be seen, but I am certain that we are no longer operating on the rules of the last secular bull market.

 

[panikhide]

a helicopter view:

That is a great idea, but what are the new 'rules' you speak of?

 

[treefrog]

That is a great idea, but what are the new 'rules' you speak of?

just posted swenlin's comment there pan; but he is referring to the method for trading a LT consolidating market rather than the method used for the recent LT bull market - I don't know what are his specific differences but I doubt it would be buy and hold. Obviously your timeframe becomes important - more MT may be relevant.

 

[Aussiejeff]

How exciting!

Heard a few media "expert" commentators whispering rumours that the market might have bottomed and could signal the end of the Bear Market.

Ooooh, I love it when they get all uppity after an office sweep win on Melbourne Cup Day!

Ahhhh. The immediacy of the Modern Media. One day its' GLOOM, the next day ... BOOM!!

 

[Aussiejeff]

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**NEWS FLASH**

Treasurer Swan says budget to take $AU40 Billion hit from financial crisis.

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Ouch!!

 

[treefrog]

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**NEWS FLASH**

Treasurer Swan says budget to take $AU40 Billion hit from financial crisis.

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Ouch!!

and that would be his most optimistic spin he can put out atm - at least its a step back from repeating 'no problem, no problem, we won't go into recession.'
but wait for it, it will come, "oh, not our fault, all theirs, but we can't now avoid recession" followed by "it looks like it will be deeper than we thought"

 

[MrBurns]

and that would be his most optimistic spin he can put out atm - at least its a step back from repeating 'no problem, no problem, we won't go into recession.'
but wait for it, it will come, "oh, not our fault, all theirs, but we can't now avoid recession" followed by "it looks like it will be deeper than we thought"

followed by, "Aw Ruddy it's my turn to go overseas"
"bugger off Swanny I've found 3 more seminars to go to, I'm not staying in this place, it's buggered, we're in a flami'n depression"

"We've spent the surplus and the future fund, quick call an election so we can lose and get out of the firing line and blame the Libs"

"How will we make sure we lose Ruddy?"

"Well Swanny we'll let you compose and deliver the policy speech with emphasis of fiscal responsibility" ........then duck, that should do it.

"Yes I'll have the fillet steak and cab sav for lunch and shut the bloody windows in the dining room, all those blasted starving peasants groaning puts you off your food"

"save my house Mr Rudd, my shares have gone down Mr Rudd, what are you doing about unemployment Mr Rudd" they just wont let up.
Swanny give another $150B to the banks and $25 to the Salvos, that ought to shut them up for a while" I'm sick of all that "my kids are starving" rubbish, GET A JOB, I did.

 

[CamKawa]

Is this bloke a nutter or what?
http://www.youtube.com/watch?v=ge2J2lNusJs

 

[MrBurns]

Is this bloke a nutter or what?
http://www.youtube.com/watch?v=ge2J2lNusJs

Has to be, the FBI would have blown his head off by now if it were true.

 

[frenzel]

Is this bloke a nutter or what?
http://www.youtube.com/watch?v=ge2J2lNusJs

Just a bit! Towards the end....

Go out and wire all your money to foreign accounts. Whether it's British pounds, Swiss Francs or French Francs, but not Euros, because the Euro is not backed by anything.

Small credibility crisis with that quote. The Amero is BS, and if you want one, speak to this guy. He's been pressing them for fun, the same coin as shown in the video.

Although I'm not convinced we won't see some radical currency rethink within our time. The US$ is certainly going to become worthless at some point as all fiat currencies in history have.

What standard would we use for a Bretton Woods II type scenario though?

 

[davo8]

How exciting!

Heard a few media "expert" commentators whispering rumours that the market might have bottomed and could signal the end of the Bear Market.

Ooooh, I love it when they get all uppity after an office sweep win on Melbourne Cup Day!

Ahhhh. The immediacy of the Modern Media. One day its' GLOOM, the next day ... BOOM!!

Indeed. I'm still voting for 7K on the DOW, 700 on the S&P and 3500 on the ASX.

It's not that I'm a perma-bear, but it really doesn't feel like the bottom yet. And the list of bad news (especially CDS implosions) just goes on and on.

 

[Glen48]

Any punters on how low the USD will go and when? Should be good in the cfd game.

 

[explod]

Any punters on how low the USD will go and when? Should be good in the cfd game.

If they keep printing the money to shore up failing enterprises then it will go down to nothing. Hopefully the new US team will put the brakes on somehow.

Germany did that from the mid 1920's and that's what eventuated. Just reading a book on the subject of the Great Depression and the manipulation of money and credit by Ludwig von Mises from his notes and papers 1923 to 1946. You would think he was talking about our crisis today.

 

[skyQuake]

Hey guys, its the end of the bear market!

http://www.guardian.co.uk/business/marketforceslive/2008/nov/04/marketturmoil-morganstanley

Hope he gets sacked for calls like this...

 

[Glen48]

Strange how all these boom start... Greed, Money... Boom.. Bang and no one ever learns.
Nothing repeats like History.

 

[doctorj]

Strange how all these boom start... Greed, Money... Boom.. Bang and no one ever learns.
Nothing repeats like History.

"History doesn't repeat itself, but it does rhyme."
-- Mark Twain

 

[dhukka]

Interesting interview with Robert Shiller on the &:30 report a couple of nights ago. Shiller saw a lot of the current mess coming years ago and called the tech bubble back in 200.

 

[kransky]

goldman sachs gray-beard on lateline tonight says we are likely at bottom and the chinese stimulus package will stop us falling into a deep recession. He says australia is very well placed to take advantage of this.

i think its BS... we are not at the bottom yet imo..us consumer sentiment and housing prices are still falling... circuit city going under... gm...

the only issue is that markets generally lead economics... but by how much? i think its too early

 

[dhukka]

I just love all these platitudes that are doing the rounds at the moment. e.g. the market bottoms 6 months before the end of a recession etc. I think John Maudlin put it well in his weekly newsletter this week.

Before we look at how weak the economic numbers were from both the manufacturing and service sector surveys, let me cover an important point about recessions. You are going to hear all sorts of analysts (including sometimes even this humble analyst!) quote statistics that in general sound like: "Since the end of WWII average recessions have lasted X months, and thus we are almost through the current one, so buy what I am selling." Or the ever popular "Stocks tend to find the bottom in the middle of a recession, so now is the time to buy."

There will be lots of variations that all assume that past performance is somehow indicative of future results. And such an assumption is a prescription for investment pain.

First, there are not enough data points about recessions between the end of WWII and now to have any statistical meaning. I count 11 recessions since WWII. In what other human endeavor would we use just 11 data points and then decide to bet our hard-earned money? While average data can have meaning and give some grounds for comparison, it should be treated with heavy levels of skepticism when used as an argument for investing with conviction.

 

[chops_a_must]

the only issue is that markets generally lead economics... but by how much? i think its too early

Yah.

You can already see the next round of news building up. I'm mainly short now.