Friday, August 21, 2015

The hibernating bear will eventually wake up

The S&P 500 finally broke out of its rut, and it broke out to the down side by closing below 2040 for the first time since February.  Every key indicator that I watch has either turned bearish recently or is on the threshold of turning bearish.  In addition to the those quantifiable "internals", there are other seasonal reasons to be weary:
  • August 2000 was the starting point of the dot-com collapse.
  • October 2007 was the stock market peak preceding the financial crisis and crash of 2008-2009.
  • October is also the month of the big crashes: 1929, 1987, and 2008.
My old place-holding market bots, which do not use all of the numbers that I track today, are designed to have delayed reactions in order to avoid whip-sawing during corrections, so they may not turn bearish for a couple of weeks even if this turns out to be the market top.  Despite the slow response time of the bots, I'm almost convinced now by the totality of internals, trends, and historical precedents that the six-year bull market is over, and that a new bear market is upon us.  Barring an amazing turn-around in the market in the next couple of days, I anticipate that last couple of indicators will flip to bearish shortly, and at that point I'll start buying shares of AdvisorShares Bear ETF (HDGE).

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