6/24/2015 – A down day with the Dow Jones down 177 points (-0.98%) and the Nasdaq down 38 points (0.73%)
I often present you with a bearish side of the market analysis. If for no other reason than that’s what my mathematical work indicates. With that in mind, it might be time to check on the bullish side of the story. David Rosenberg presents a good argument here 6 Reasons to Seek More Gains in Stock Market
Let’s look at them one by one, my comments are in green:
- Resilience: “It bends but refuses to break. It has now been 1,350 days since the last major correction in the S&P 500. There is still plenty of room to run considering we had stretches of 2,500 days between 1990 and 1197 and 1,600 days from 2003 to 2007.” A correction is a decline of 10 percent from a market peak.
- “It refuses to break for now”. That in itself doesn’t mean anything. It can as easily breakdown tomorrow. 1990-1997 – we were in a secular bull market. We are still in a cyclical bear market today. 2002-2007 move up was exactly 1250 trading days. I am not sure where he got his 1600 figure.
- Monetary Policy: “By the time the Fed starts to tighten, we are typically only one-third of the way through the market cycle. And the markets don’t even believe we are that close to the first rate hike anymore.” Fed Funds futures show that investors place a 17 percent chance of a rate hike by the Federal Reserve in September, and 52 percent likelihood in December.
- We are not in a “typical environment”. The FED went all in between 2009-today. We have never seen such a market environment before. I have said it before and I will say it again, interest rates are now irrelevant. The market will correct with or without rate hikes.
- Cyclical Gainers: “Market leadership is in the sectors that are very much pro-cyclical – consumer discretionary, banks, technology, more recently the homebuilders and the small-cap stocks.” The Russell 2000 index of small-cap stocks has gained 6.6 percent this year, outpacing bigger companies.
- There is yet another explanation for the Russell/Nasdaq. We are in a highly speculative bubble and they are setting their respective blow off tops. We saw this very same behavior at 2000 top
- Investor Sentiment: “Sentiment remains very poor which is a contrary positive.” Rosenberg cited several indicators of investor bearishness which could set up the market for a massive short squeeze.
- I am not seeing this. Most bears I know have capitulated. VIX/VXX are at the bottom of their respective trading ranges. If anything, everyone I talk to expects this market to go up. Personally, I have found sentiment readings to be a waste of time. They rarely predict anything.
- Economy: “There has never been a bear market without there being a recession. The leading indicators are behaving in a very early-cycle manner, even with this expansion celebrating its sixth anniversary.” He said the current industries with the most momentum, housing and autos, usually do well 40 percent of the way through a typical business cycle.
- We are not in a business cycle. We are in a credit cycle. That’s why we haven’t seen CAPEX. Plus, its the stock market that leads the economy and not the other way around. Take a look at the chart below. Enough said.
- Relative Value: “Valuation support is also coming from the bond market as yields have retreated from the recent highs of 2.5 percent to 2.27 percent.”
- You kidding….right? What if tomorrow yields go back to 2.5? No more support? Plus, must I remind everyone that Shillers P/E is a third highest level since 2000 and 1929 tops.
At the end of the day we can argue until Greece finally decided to “default” on where we are in the market cycle. I will leave you with this thought. Math doesn’t lie and opinions are dime a dozen. That is to say, my mathematical and timing work is clear in suggesting that a massive bear market is right ahead of us.
This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.
(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. June 24th 2015 InvestWithAlex.com
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