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Bear worries


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#1

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Posted 27 April 2003 - 05:12 PM

Hello folks,

As mentioned in the other thread, I believe that the markets are close to a major top and, most likely, we have already seen the high. That thread contains plenty of arguments why this is the case. Unfortunately, there are several things that worry my in this bearish picture. I'll try to describe them here.

#2

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Posted 27 April 2003 - 05:21 PM

While many indicators are screaming that this is a major top, the Bullish Percentage Indexes of some sectors (all of the main ones except that of the NASDAQ and the vast majority of the sector ones) are still far from the tops they made in December. Oh, they are high enough to make a top here and to turn down, don't worry about that. However, they don't confirm that this was a major top.

They suggest that the decline (i.e., while they get back to their respective Dover Sole levels) will be much shorter-lived and milder than the declines, which have followed the previous major bear market rally tops. The state of the BPIs is inconsistent with the notion of the main indices falling below the October lows by the end of the summer.

This is what worries me. Sure, we're going to get our decline. But it might not be as severe as I previously expected - meaning that perhaps I should start changing my idea about how this bear market is going to develop for the longer term.

Regards,
Vesselin

#3

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Posted 27 April 2003 - 05:58 PM

Here is a longer term view of your COMPQ / MACD Chart.

If you look, you will see that the MACD was rising all the way until the drop in the market in 2000. One way to interpret the rising MACD in your chart would be a distribution phase or in Elliott Wave perspective a corrective phase. From an Elliott Wav perspective, the purpose of wave 2 which is what we have been in since Oct 2002, is to recreate the euphoria at the top of wave 1. This creates the necessary psychological phenomenon to create the next wave down which on this board is known as the turd of a turd of a turd.

In the end, the signals can be construed anyway you want to view them based on your own psychological condition. It could be a bull cycle or it could be a head fake depending on which way the viewer is inclinded. Price and volume action will determine the future. People should not be tied to any particular view of the market but instead should watch for confirmation or divergences from their views everyday. Ultimaltely, the price action will tell us what was correct.

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  • compq.gif


#4

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Posted 27 April 2003 - 06:06 PM

If you look, you will see that the MACD was rising all the way until the drop in the market in 2000.

Yes, I know - although I prefer to use PPO instead of MACD with long-term timeframes; it's less misleading.

One way to interpret the rising MACD in your chart would be a distribution phase or in Elliott Wave perspective a corrective phase.


The way I am interpreting it is that the momentum of the decline is slowing down. That doesn't tell us that the bear market will end tomorrow (or even when) - but it does tell us to be on the lookout for it. One of these days the positive divergence will result in what it has been implying all along. :wink2: While I realize very well that it hasn't happened yet, it is important not to get mirred in a permanently bearish stance and to watch the indicators carefully.

Regards,
Vesselin

#5 2 floaters and a sinker

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Posted 27 April 2003 - 09:11 PM

While many indicators are screaming that this is a major top, the Bullish Percentage Indexes of some sectors (all of the main ones except that of the NASDAQ and the vast majority of the sector ones) are still far from the tops they made in December. Oh, they are high enough to make a top here and to turn down, don't worry about that. However, they don't confirm that this was a major top.

They suggest that the decline (i.e., while they get back to their respective Dover Sole levels) will be much shorter-lived and milder than the declines, which have followed the previous major bear market rally tops. The state of the BPIs is inconsistent with the notion of the main indices falling below the October lows by the end of the summer.

This is what worries me. Sure, we're going to get our decline. But it might not be as severe as I previously expected - meaning that perhaps I should start changing my idea about how this bear market is going to develop for the longer term.

Regards,
Vesselin

The assumption I've made all along is that the correction of the bull market would eventually end up looking like a big ABC pattern. I think we are in the A now. It's just a question of exactly where in the A we are.

One thing I have been wondering about is the rate of the decline. At a certain point that rate has to slow or the idicies would go to zero and do it very quickly. But if you believe, as I do, that this bear is going to continue for several more years, you run out of index before you run out of time.


I think the character of this next decline will determine how the rest of the bear plays out. The question is are we about enter a 3rd wave down from the top or has that happened and the plate next is the 5th wave of the large A . If it's a 3, the decline will travel a large distance in a relatively short period of time and what follows would probably a relatively sharp 4 before the last wave down.

It that is the case, we would could then expect a multi-year cyclical bull market which would be the B and when that was complete, a C wave decline. That C wave would be a monster and probably send the world into a decades long depression.

If what's coming is a 5th wave, the decline could still be sharp but far less sharp than a 3 and we could still make new lows. Then a shallower, shorter B wave (year ot two?) and the resulting C would get us to a bottom that while much lower than here, would stop short of total world wide financial destruction.

Personally, I prefer the latter, I do so enjoy hot and cold running water, but i fear for the former.

So as far as big picture structure goes, at some point it would make sense for a long rally phase, or at least a very long, very frustrating basing process to occur before we turn lower for the final bottom.

I think that whenever the time comes for the final capitulation phase, very few people will notice.

Edit: Obviously the nasdaq doesn't have room between here and the bottom for a three, I was speaking of the broader indicies. I think the nasdaq is on it's way to becoming the stock market for the last 100 years as the survivors migrate to the NYSE and the comp it re-assumes it's OTC moniker.

#6 ApresMoi

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Posted 28 April 2003 - 11:39 PM

Look at the Nikme. It had one sharp drop taking about 3 years, then for about 8 years it went basically nowhere - but did it in very wide swings.

:(

Vess: Are there T/A methods which suggest 1) a future long-term trading range [SPX and COMP] and/or 2) a periodicity?

Do you have any projections, tentative as they may be?

#7

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Posted 29 April 2003 - 08:18 AM

Vess: Are there T/A methods which suggest 1) a future long-term trading range [SPX and COMP] and/or 2) a periodicity?

Unfortunately, I am not aware of any. There are simply too few bubbles with reliable charts to draw experience from. :( My guess that the US markets will develop Japanse-style is just that - a guess. It is based on two key similarities - the Kondratieff cycle suggests that the US economy is entering a deflation (just like the Japanese economy started to deflate in 1990) and the "powers that be" try to prevent a purifying crash by manipulating the markets in various ways, just like they did in Japan. But I could be wrong.

Regards,
Vesselin

#8

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Posted 05 May 2003 - 07:27 AM

And another one. Carl Swenlin, somewhat incredulously, is calling for a major long-term buy signal and a prolonged uptrend (after a short-term correction) - source. He's basing his arguments on the fact that his Price/Momentum Oscillator (some proprietary indicator which looks a bit like a MACD of two ROCs to me - but I don't know how exactly it is computed) is about to cross above its 10-month EMA on the monthly SPX chart, from rather low levels:

Posted Image

I diagree with him and my reply essentially is - look at the Nikkei.

Regards,
Vesselin

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  • nikkei.gif


#9 Abby Justa Colon

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Posted 05 May 2003 - 10:23 AM

Great charts Dr. B!! Really enjoy this board... :rolleyes:

#10 ApresMoi

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Posted 05 May 2003 - 01:23 PM

Carl Swenlin, somewhat incredulously, is calling for a major long-term buy signal and a prolonged uptrend (after a short-term correction)

http://marketviews.t...Swenlin/pg1.htm





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