David Nichols de Hoje
Enviado: 10/7/2003 17:22THURSDAY a.m.
July 10, 2003
Long-Term Bear Markets
by David Nichols
Yesterday I mentioned that the current 1000 (+ or -) level on the S&P 500 may end up being a crucial upper barrier for a very long time, maybe even the next 10 years or so. That's a bold statement, I realize, and certainly not something you're hearing from the Vested Interests.
I've been showing how our anti-bubble market is closely tracking other anti-bubbles of the past, especially that poster-child of speculative excess, the Nikkei. I've also shown recently how our anti-bubble is demonstrating period doubling, where the length of the bear market cycles are roughly doubling in length.
This exact same thing can be observed in the long-term post-bubble chart of the Nikkei. It's pretty amazing, once you're tuned into it. And luckily, to help us tune into this even further we have the ground-breaking research of Professor Didier Sornette and his lab to characterize these bubble market oscillations in a detailed and highly descriptive way.
The upside cap on the Nikkei has been right around the 21,000 level. The 1000 level on the S&P 500 should roughly equate to this over the coming years, plus or minus 50 points or so. In my opinion, the sooner you're aware of this, the better chance you'll have to prosper over the extremely difficult investment environment we are all facing over the next 15 years. Unfortunately, if history plays out as it usually does in this bear market, the ultimate lows won't be seen until the middle of the next decade.
Another thing that's striking about this Nikkei chart is the number of really great rallies this market has seen over the years. The rallies in a prolonged bear market are sharp and quick, as we've just seen here.
In such a bear market environment, the essential thing to track is investor sentiment. The correct path to follow is the path that the least number of people are expecting. Of course, there can be powerful exceptions to this -- as we are seeing now, as everybody and their brother is bullish and the market has not fallen apart. In a bubble, or a mini-bubble, the majority can have their way for a while.
But a bear market is really good at building illusions. This current rally is a great case study. If you asked 100 people on the street whether the market has been up over the past month, about half would say "I dunno" and the other half would say "Yeah, it's been up." The truth is the market has not been up the past month, but has been sideways to lower since the spike top on June 6. It just feelslike it's up because prices have not fallen apart, even though they have been given every opportunity to do so.
The spike move up we've seen off the bottom in March is highly characteristic of a bear market, not a new bull market. An early bull doesn't drop the percentage of bears down into the single digits in the sentiment surveys. That just doesn't happen. That's what bear market rallies do.
The healthiest thing for this market to do would be to drop back down to the SPX 875 - 900 range, and make everybody incredibly bearish. Extending to the upside like this among a chorus of bullish Hallelujah's just isn't the recipe for a long-term bull market.
The VIX is now bumping up against the bottom of its range. We should be on the lookout now for a sharp reversal off the bottom line, and a potential move back up and over the top of this low VIX range. That would signal the start of a much bigger decline phase.
The question now is whether the current move back up towards the highs is a failing re-test, or whether that move down to 962 was the springboard to a new blistering upside run. Will the real intermediate-trend please stand up?
A sharp failure here back below 1000 will likely trigger a cascade effect down among wide-spread recognition of a double top. Traders got some cold water in the face last night when Yahoo didn't blow away numbers, as their current $21 billion market cap demands. A move back below 974 would indicate a pullback all the way to 900-910 is in the works.
Sentiment Dashboard
by Adam Oliensis
SENTIMENT TANK: Drained by 2 points to 2% full of negative sentiment.
SHORT-TERM: Advance phase remains intact despite prices on the senior indices backing off.
MID-TERM: Remains in a neutral condition with 0 on the CDI.
LONG-TERM: In an extremely mature advance phase (after toying with rolling over). Weekly CDI is at 1. With almost no gas in the tank and almost no confidence on the CDI we're sure ripe to pull back.
BOTTOM LINE: Given that yesterday prices on the senior indices fell along w/ the level of the tank, we saw an inappropriate rise in complacency yesterday. However it follows on the early-week "pip" up in fear on price appreciation, so we can't get too irate about it, not on a one-day basis. More broadly, however, the terribly low level of fear during a "right shoulder" of an H&S Top on the SPX (gotta get over 1015 to negate it) is extremely dangerous. With the VIX down at 21 it is at major support. It has to either break down (and send the market into a final paroxysm of buying) or else reverse and head higher (which should correlate to the market selling off).
July 10, 2003
Long-Term Bear Markets
by David Nichols
Yesterday I mentioned that the current 1000 (+ or -) level on the S&P 500 may end up being a crucial upper barrier for a very long time, maybe even the next 10 years or so. That's a bold statement, I realize, and certainly not something you're hearing from the Vested Interests.
I've been showing how our anti-bubble market is closely tracking other anti-bubbles of the past, especially that poster-child of speculative excess, the Nikkei. I've also shown recently how our anti-bubble is demonstrating period doubling, where the length of the bear market cycles are roughly doubling in length.
This exact same thing can be observed in the long-term post-bubble chart of the Nikkei. It's pretty amazing, once you're tuned into it. And luckily, to help us tune into this even further we have the ground-breaking research of Professor Didier Sornette and his lab to characterize these bubble market oscillations in a detailed and highly descriptive way.
The upside cap on the Nikkei has been right around the 21,000 level. The 1000 level on the S&P 500 should roughly equate to this over the coming years, plus or minus 50 points or so. In my opinion, the sooner you're aware of this, the better chance you'll have to prosper over the extremely difficult investment environment we are all facing over the next 15 years. Unfortunately, if history plays out as it usually does in this bear market, the ultimate lows won't be seen until the middle of the next decade.
Another thing that's striking about this Nikkei chart is the number of really great rallies this market has seen over the years. The rallies in a prolonged bear market are sharp and quick, as we've just seen here.
In such a bear market environment, the essential thing to track is investor sentiment. The correct path to follow is the path that the least number of people are expecting. Of course, there can be powerful exceptions to this -- as we are seeing now, as everybody and their brother is bullish and the market has not fallen apart. In a bubble, or a mini-bubble, the majority can have their way for a while.
But a bear market is really good at building illusions. This current rally is a great case study. If you asked 100 people on the street whether the market has been up over the past month, about half would say "I dunno" and the other half would say "Yeah, it's been up." The truth is the market has not been up the past month, but has been sideways to lower since the spike top on June 6. It just feelslike it's up because prices have not fallen apart, even though they have been given every opportunity to do so.
The spike move up we've seen off the bottom in March is highly characteristic of a bear market, not a new bull market. An early bull doesn't drop the percentage of bears down into the single digits in the sentiment surveys. That just doesn't happen. That's what bear market rallies do.
The healthiest thing for this market to do would be to drop back down to the SPX 875 - 900 range, and make everybody incredibly bearish. Extending to the upside like this among a chorus of bullish Hallelujah's just isn't the recipe for a long-term bull market.
The VIX is now bumping up against the bottom of its range. We should be on the lookout now for a sharp reversal off the bottom line, and a potential move back up and over the top of this low VIX range. That would signal the start of a much bigger decline phase.
The question now is whether the current move back up towards the highs is a failing re-test, or whether that move down to 962 was the springboard to a new blistering upside run. Will the real intermediate-trend please stand up?
A sharp failure here back below 1000 will likely trigger a cascade effect down among wide-spread recognition of a double top. Traders got some cold water in the face last night when Yahoo didn't blow away numbers, as their current $21 billion market cap demands. A move back below 974 would indicate a pullback all the way to 900-910 is in the works.
Sentiment Dashboard
by Adam Oliensis
SENTIMENT TANK: Drained by 2 points to 2% full of negative sentiment.
SHORT-TERM: Advance phase remains intact despite prices on the senior indices backing off.
MID-TERM: Remains in a neutral condition with 0 on the CDI.
LONG-TERM: In an extremely mature advance phase (after toying with rolling over). Weekly CDI is at 1. With almost no gas in the tank and almost no confidence on the CDI we're sure ripe to pull back.
BOTTOM LINE: Given that yesterday prices on the senior indices fell along w/ the level of the tank, we saw an inappropriate rise in complacency yesterday. However it follows on the early-week "pip" up in fear on price appreciation, so we can't get too irate about it, not on a one-day basis. More broadly, however, the terribly low level of fear during a "right shoulder" of an H&S Top on the SPX (gotta get over 1015 to negate it) is extremely dangerous. With the VIX down at 21 it is at major support. It has to either break down (and send the market into a final paroxysm of buying) or else reverse and head higher (which should correlate to the market selling off).