Wednesday, November 26, 2008

Cheering on the optimists

This week's rally has caused a short-term spike in optimism, and if this bullish sentiment can just hang on for several more trading days, then I will finally have an opportunity to buy into GRZZX and make low-risk money on the next market slump. So please - everybody stay cheery!

Monday, November 24, 2008

Two days instead of one

This time around the huge 13% gain in the S&P 500 took two days (Friday and today), which is a little slower than rising 11% in one day. I suppose that's slightly less bearish for the market.

Slightly.

Sunday, November 23, 2008

Downward Acceleration

The S&P 500 index has actually been accelerating downwards since late October.

At the same time, investors are becoming pessimistic again by more than one measure, and this can fuel an eventual short-to-medium-term rally. As I've said before, this is still a bear market, and I'm only interested in buying a bear fund (GRZZX) at the end of a sucker rally when optimism is high. So, for the time being I'm still sitting on the sidelines.

Thursday, November 20, 2008

April 14, 1997

... That's the last time the S&P 500 index closed lower (743) than today's close of 752.
  • The dot-com bubble and the crash that followed played out entirely at higher prices than today.
  • The 2002-2007 bull market has been completely erased.
  • The infamous market low on October 9, 2002 would be an improvement now.
If eleven-and-a-half years with no capital gains doesn't shake one's confidence in buy-and-hold investing, then nothing will.

Wednesday, November 19, 2008

Less than 4% to go

On October 9, 2002, the bear market that deflated the tech/dot-com bubble reached its all time low, with the S&P 500 index closing at 776. Five years later to the day, the S&P reached its highest ever closing price of 1565, amounting to a 101% gain. Today the S&P closed at 806, which is less than 4% away from completely erasing the gains of that five-year bull market.

Something has to eventually shake up the emotions of investors, either positively or negatively, to get the market to move in the same direction for more than 10 days, and passing below the 2002 bear market lows may be just the catalyst. Such a dispiriting event could trigger a new group of investors to give up on stocks, drive the market even lower, and create the conditions for a rally with legs. Granted, this is simply hopeful speculation, but without any solid forecast to pass along, the next best thing I can do is describe possible scenarios.

Monday, November 17, 2008

Tedious

We've been here before, and it's just as boring for me to write this as it is for you to read it.

The S&P 500 index is once again bouncing around inside of two converging trend lines. The chart below shows the closing price at the end of each trading day for the last two months.


The 850 price level has been a solid floor so far, and the neutrality of my market indicators turns out to have been prescient after all, because stocks have been without direction for more than a month.

So, in lieu of something more interesting to say, here's some entertainment courtesy of the late Donald O'Connor:

Thursday, November 13, 2008

Twofer Thursday

Today the S&P 500 index passed below 820 for the first time since October 2002 (a new low), and then rallied 11% in only 3 hours to close at 911 (an insane rally).

The bear market continues.



Wednesday, November 12, 2008

Back to the bottom ... again

Remember the +11% day on October 28? The S&P 500 is less than one half of one percent from erasing it completely.

It's also only 1.5% away from reaching the all-time intra-day bear market low of 840.

For the umpteenth time: I never make bull market investments in a bear market.

Tuesday, November 11, 2008

Neutrality

Just about everything is in neutral right now. Not only is the S&P 500 index lingering in the 840-1000 range, but the short-term market indicators that I watch are also at intermediate levels - neither bearish nor bullish. Sentiment indicators were moving into optimistic and bearish territory earlier, but the recent retreat of the market has pulled them back.

In the meantime, the long-term trend is still a bear market, and the odds favor the market falling further before reaching bottom.

Friday, November 07, 2008

Bouncing around and going nowhere

On October 7, the S&P 500 index closed below 1000 for the first time in this bear market. Ever since, the S&P closing price has rattled around between 840 and 1005. Anyone who has been in either stocks or bear funds for the past month has seen some wild swings in their investments, but no large gains or losses in the long run. Despite protests from both bearish and bullish readers of this blog, I've been in cash the whole time.

Tuesday, November 04, 2008

Narrow mini-trend

The S&P 500 index has been trading in a narrow rising wedge pattern for five trading days now, and has gained almost 20% since its intra-day low of 840 on October 10. Optimism is steadily increasing in the sentiment indicators as well, so I think this is setting up an opportunity to invest in GRZZX and make money on the next slump.

p.s.: I will let readers know here when I buy GRZZX.


Monday, November 03, 2008

Election eve

While tomorrow's outcome may affect stock prices on Wednesday, I doubt it will have an effect on the current bear market trend. On the other hand, the new President may very well affect long-term prices over the next several years, but I'll leave that for a later post.