are we in a bear market
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Are We In A Bear Market ?
The questions that our => MEMBERS HERE, keep asking us is ' are we in a bear market ' or Are we in an early stage bear market or a late-stage bull market?
This seems to be a complicated subject I guess, and while no one is an accurate subject we do have a few charts that seem to be giving us a huge advantage in trying to answer this tricky topic.
A bear market in stocks generally undergoes three stages.
Source : MarketWatch
STAGE 1:
The first is confusion: The market stalls, and its direction sways back and forth as investors are divided as to whether it is a correction amid an ongoing bull market or the beginning of a new bear market.
STAGE 2:
In the middle stage, the market falls steadily and orderly as investors acknowledge it is a new bear market.
STAGE 3:
In the final stage, the market decline accelerates as investors capitulate.
We do not think that today’s market looks like the early stage of a new bear market, although the economic backdrop doesn’t seem like it would support a severe or lengthy one. Even though the S&P 500 Index hit an all-time high of 2,134.72 as recently as May 20, it mostly has been stuck in a narrow range (between 2,050-2,100) since December.
The most important chart here does not really seem to suggest we are in the start of a BEAR market at all. Of course we can be wrong, but normally when you see the start of a BEAR MARKET, you do not see such VIOLENT and QUICK recoveries! See the chart below. You can see we had a HUGE sell off of 300 points, from 2100 on the S&P right back down to nearly 1800, and then a swift and quick rally back up to the old HIGHS!
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| are we in a bear market - large sell off has recovered! |
I can hear the cries on the street right now, by many analysts saying that the HUGE dip we saw in AUGUST on the CHINA news is the start of a bear market, and we are experiencing a dead cat bounce before a HUGE crash that will come in 2016.
I guess that is just a guess, because right now, when you sit back and take a look at things intelligently that sell off in AUGUST might have just been an extremely good opportunity for bulls waiting for their DIP to get back into the market, and make off like bandits. I mean, if you did take that sort of action, you would be sitting back in the pool sipping on your martini smiling, while others out there are perplexed and confused to exactly what is going on?
Just quietly, the charts we are looking at now, seem to suggest, that the bull market that started back in 2009, is not done just yet, so do not hold your breadth. Just 2 months ago, many people were calling TOPS and DROPS and saying this THE "EFFING" END OF THE WORLD COMING!..... LOL
Then you fast forward several weeks, and the S&P is back up at the old highs of 2014. That was one hell of a rally, we just saw if you don't mind me saying!. Of course the market has died down a little, but it seems like its way to early to write off the bulls just yet.
The recent market rout pushed the S&P 500 down to as low as 1,867.01 on Aug. 24, a 12.5% drawdown that exceeds the 10% threshold generally regarded as a correction. This is the first market correction since 2011, which occurred during the U.S. debt-ceiling crisis. The market has recovered somewhat, and based on the closing price Sept. 15, the S&P 500 needs to fall another 13% to reach the 20% drawdown threshold generally considered to be a bear market. Although we are less than halfway there, the correction-versus-bear-market debate has heated up. So are we already in the early stage of a bear market?
It’s only in hindsight, when we look at the data, that we know for sure the exact moment when a bear market began. Past recessions have been blamed on a variety of reasons, from Internet investors going crazy during the dot-com bubble to a complacent Federal Reserve ahead of the Great Recession. But as anyone who has experienced these periods can attest, no one really knows for sure when recessions begin, not even the almighty Fed. It is my belief that it also is important not to get hung up on numbers like 10% for a correction and 20% for a bear market. Investing is not an exact science, and these numbers serve only as guidelines, unlike the temperature at which water freezes. And whether a market is labeled “correction” or “bear” may not concern investors: a 19.5% drop is just as ugly as a 20% drop.
Here is the upshot to that. If the S&P 500 indeed dips below the 20% drawdown point due to market volatility, and thus enters into bear territory, it might be the perfect time to buy.
Unlike recent market downturns, which were shallow and short, this decline indeed feels different. We can blame Greece, China or even the Fed, but I feel the fundamental reason for this downturn is that the stock market had become expensive after more than a six-year, near-non-stop advance, in which its value had more than tripled. With the Fed’s interest-rate “lift-off” approaching, it is hard for investors to justify paying up for risk assets (any asset that carries a degree of risk). During previous market sell-offs, including the scary 2011 U.S. sovereign-debt crisis, investors took advantage of those downturns to scoop up stocks because they were still cheap and thus worth the risk. That may not be true anymore; today’s price-to-earnings multiple, based on $118 for 2015 earnings, is still a hefty 16.7.
There are two ways for stocks to become cheap again: Prices must fall or corporate earnings must rise, assuming stock valuations are unchanged. With all the volatility and anxiety caused by the recent market rout, stock prices now are 7% cheaper than at their peak, a relief for a stock market in which the fundamental issue was rich valuations. With 2016 consensus earnings projected at $130 per share for S&P 500 companies, the S&P 500 forward price-to-earnings ratio is 14.8 — very much in line with the long-term average of 15. If the stock market really enters bear territory (below the 20% drawdown point of 1,707.87), and earnings projections hold, then the S&P 500 will trade below 13.2 times 2016 projected earnings, once again becoming a bargain.
The current data suggest that the 2015 stock market is much different from the 2007-2008 Great Recession and the 2000 dot-com bubble (the previous two bear markets). In 2008, there were systemic risks in the entire financial system; in 2015, economic fundamentals are much healthier. In 2000, stock valuations reached absurd, stratospheric levels; in 2015, stocks (even though expensive), are still within sensible territory. The current economic environment and stock valuations simply do not portend a full-blown bear market.
The upshot is that if the S&P 500 indeed dips below the 20% drawdown point due to market volatility, and of course that COULD happen. That would probably enter us into bear territory, it might be the perfect time to buy. With a full-blown bear market a remote possibility, there will be little impetus for the stock market to keep declining after a 20% fall, as it already will be a relative bargain. Lots of people are confused, but perhaps this clears things up a bit for you?
None of this rules out the effects of a rate increase by the Fed or further erosion of China’s gross domestic product. I mean that could happen too. When investors get spooked, it can be difficult to predict their behavior. But once the dust settles, prudent investors will look at market fundamentals and take advantage of relative buying opportunities. Solid earnings and reasonable price multiples have been stalwarts for investors in past cycles. There is no good reason to assume they won’t again serve to keep the bear in his cave.
It just seems that the exact time the market suffers a drop, and the bears do come out of their cave and prophecy THIS IS THE END OF THE WORLD, and SCREAM from the rooftops about a MARKET CRASH for the ages, if you look back over the last 7 years, when they got highly negative, and predicting bad things, it was a perfect time to BUY or GET BACK in the stock market!!!!! If you took this course of action, you will be in serious profits so far. Just saying!
So in total, I would say that we are NOT in BEAR MARKET, or in the beginning stages of a BEAR MARKET. But it could come soon, and we are even open to that idea. But for now, we must follow and watch the charts carefully as the volatility increases in the global market environments.
In conclusion, we could be right in the Beginning of new reset bull... I guess there are several points above that now basically tell us that we are IN FACT NOT IN A BEAR MARKET! That would be our prediction, but we might be coming to the latter stages of a bull market. I mean our members has done ridiculously well since 2009, at a time when everyone else was screaming the market was about to crash, our indicators back then, said a MULTI-YEAR bull market was on the way. Here we are years later, and that turned out to be very true.
Now we are in a market environment where lots of BULLS and BEARS are totally confused and I can tell you that its creating HUGE PANIC, but not only that, its also creating HUGE OPPORTUNITIES going into XMAS. Most people forget, when other people see PANIC, and VOLATILITY, smart people see BARGAINS and OPPORTUNITIES for the plucking. As a trader, timing is everything, and right now we are coming into a time where someone who knows what they are doing, can make the next 12 months very profitable.
I cover more and more technical analysis ==> HERE in our VIP members section.
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