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Sunday, 18 October 2015

when will bull market end



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Will the bull market end in 2015 ?

It's a question on everyone lips, and probably yourself while you read this blog, right?

Are Stocks are likely to rise as 2016 approaches? Or are we at the forefront of a 2008-like situation, where stocks and many asset classes about the drop like a rock!?

It's a good question to ask, and we think with the nervousness out there right now its about time that we delve deeper, take a look at some good charts, and try to peer into the future when the time is right!

U.S. stocks closed higher Friday for a third week of gains as mixed data pushed out expectations for the timing of the first rate hike, and that has alot of money managers out there scratching their head, and wondering what the hell to do, going into Christmas 2015.

You see there are a lot of underexposed money managers out there scratching their heads, as you read this. Some of them have been losing money left, right and centre, but the smart ones may be buying especially after the dramatic dip we experienced back in AUGUST 2015 and as the market seems to be recovering quite nicely in the last few weeks.

IF we look back to Less than a week ago you can see that the Dow Jones chart was sitting around 16,000 again and at the same time, there were many stocks  hitting new 52-week lows. If you were one of the ones that paniced and sold off everything in your portfolio, like some out there did, you would be kicking yourself today, because after the employment numbers stocks rounded off, and are majorly off the lows right now. When you look at the market, we have sort of put in what looks to be a double bottom, or what is termed a "W" pattern [a term known to many technical analyst]

The thing is, that W pattern could be very subjective. We could be either putting in a major bottom, or we are just in a sort of dead cat bounce, before another dramatic selloff occurs.

The thing is, when you look at the DOW chart above,  that W pattern could be very subjective. We could be either putting in a significant and major bottom, or we are just in a sort of dead cat bounce, before another dramatic selloff occurs.

We have major earnings being released this week. And some out there are saying that could really take the jam out of the doughnut. :-)

Even if the JAM is taken from the doughnut, we do think its a bit premature to be calling the end of the bull market here. When you have a look at the monthly Russell chart, you can see there is a major upwards channel here, now we are down at the bottom of this major monthly bottom channel, its a bit nervous, but to call the end of the bull market, right now would probably be a bit of an oxymoron.

Dow Industrials' have had their best winning streak since July: The markets have had a nearly 5% straight up move since the most recent bottom was put in last Friday morning. On the one hand, there's that old SPOOKY saying that has merit: "The biggest rallies happen in bear markets." On the other hand, that Friday bottom is a higher low that the chartists will have to respect. I still think there's a lot of money managers out were worried and in a state of panic we could get a 2008-like meltdown but are now starting to cover/buy more stocks as the market runs away from them.

This market is on a dime right now, and there is more than a possibility that we drop like a rock back to the August lows, but touch wood, the path of least resistance for stocks and assets in the coming months, might be the upside. That is our best guess.

So the market is a little subjective. You have brokers out there saying, we are about to drop and experience the continuation of the AUGUST crash, we are just taking a little breather here. And then again you have others who keep saying the market is in a major bottoming pattern because the lows of the market were tested, and they failed to get below.



Its plain and obvious to us, that at the end of 2015 there are  reasons to be bearish are actually reasons to be bullish too. 

And in addition to those, lower stock prices are making me more optimistic. The stock market is far less volatile in OCTOBER than it was several months ago. So that might be a tick of those in the bulls camp. But just a few months ago, we have to remember that most Investors were too scared to get back into the market, and others were too scared to get out. The way we see it is that many investors out there are still complacent.

Things have turned more bullish suddenly.  All the factors (noise) like Fed interest rate hikes, China’s market, the oil price drop, strong U.S. dollar, which are important to many in market, haven't changed much. Also, if you ask who is scared more right now, I guess we would get 50-50, which means we are not trading opposite to the crowd.

But let's run through each of your so-called bearish points and see why they're actually probably bullish. We've been hearing about a Fed rate hike nonstop and I don't believe that moving interest rates from 0% to 0.25% or even to 1% is going to stop people from seeking higher risk assets like stocks since rates are just too low.

China's consumer class is going to grow by millions of people this year and next. Oil and energy price drops are good for other businesses and all consumers around the world. A strong U.S. dollar means that every dollar I get paid with is more valuable than it would be otherwise, and I want what I get paid in to have more value, not less. So I actually find most of those economic trends you're citing to be quite bullish, not bearish. And stocks have come down 30%-50% almost across the board, which is also bullish in my mind.

We're sort of moving sideways on the sentiment front, and Right now looks like the Treasury market is certainly in a pretty narrow range, which is not surprising given the increasing consensus on the Fed (raising rates later), and its going to make people more nervous in the next week.

All in all, to people calling the end of the stock market bull at the end of 2015 is just plain crazy. You have to remember that this market has been like a freight train for many years now. Although 2015 has been a volatile year and tricked many traders we must remember that every time we get a significant dip, they are bought into. So that could be a little warning that this bull market is indeed not starting to end, but just taking a well deserved rest, before the next upside rally starts to show.

Remember, bull markets do not go up in a straight line. Basically we have been witness to many bull markets, and they tend to go 2 steps forward, and then one step back. And those are all the hallmark signs we have right now. We might be just stepping back for a bit, before we see fresh and new highs by Christmas 2015? Well, that is just a guess on our part.  Of course that can all change, simply put, but you have to realize that bull markets do not just turn on a dime and finish in a day, or a week or even a month. They take time. If there is a bear market starting, well, you will know about it that is for sure. It will not be raining stockbrokers, but you will see panic like we saw back in 2008. So far we have not seen the beginning signs of all that thank goodness, but if we do you will be the first to know. :-)

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