“Most global stock indexes have decisively broken below their 200 week moving averages, which is a major trend reversal. The intermediate term (3 month) and long term (12 month) model forecasts point down. We recommend taking advantage of every minor rally to close long positions, go short and shift out of tech and cyclicals into defensive groups. Stock indexes haven’t yet had the big surge in volatility (5% daily NASDAQ moves down and up amidst a declining market). That is probably approaching. Bear market trading is typically more productive selling into those big percentage bounces, rather than selling into big declines and then watching the market bounce back in your face.
Potential downside targets after a 200 week average breakdown are 1) the 200 month average and 2) The previous 2002-2003 lows. Those levels are 25%-47% below current levels for most stock indexes. U.S. financial indexes are already there (BKX, XLF). So don’t think it can’t happen for the broader market and other currently elevated indexes, stocks and groups.”
The Belkin Report
July 6, 2008
I’m not expecting the S&P to drop below 1150 during the course of this calendar year.
(More selling next year, however).
Ouch. July 7th was close to the levels we are at now.
SP 1250 (7yr low – 800)
DOW 11,200 (7yr low – 7700)
NAS 2243 (7yr low – 1200)
Read something else on this last week. The 200 week ma idea is intriguing. Stocks like GM are already there. It cant happen here?
If we get a 25-47% drop from here, Dennis Kneale is just going to sob on camera and mumble “My 401k!!!!!!!!!!!!!!!”
Sometimes I feel like I may be that guy on the roof during a flood. Is this the boat that G-d has sent for me?
Or is it the one true capitulation? I will never know for certain.
It was nice at the top, and the party was great… (even the prez realized that some people drank way too much.) Humpty Dumpty (the economy) can’t be put back together on Wall Street.
The CEOs of Financials and the SEC folks seemed to think that masking tape (regulation), and a little glue and tissue paper to hid the cracks might work, but eventually the masses (other countries) all find out… that Humpty is broke.
The United Mother of Consumerism is tapped out… home prices are falling… credit is harder to come by… the spiral downwards is painful. And energizer bunny (government deficit) just keeps growing and growing.
It’s like watching the fall of Soviets… gosh the 90s’ re-runs are amazing.
The July spike in trader sentiment (VIX and PCR) wasn’t high enough to signal capitulation. As someone in Baron’s noted, we have been in the eye of the financial hurricane. e.g. all appears to be calm after the first wave of write-downs, but there is another huge wave coming due to HELOCs, Credit cards, Alt-A etc. The games are just beginning.
Bah! It’s always the same story and the market always moves higher. Why didn’t all you experts sell out at the top? Maybe because nobody knows what the market will do next?? MAYBE you can sometimes correctly guess a time to sell, but can you also predict the correct time to buy?? History shows if you just dollar cost average that you come out with better returns than all this active management nonsense. Your all just fooling yourselves and giving yourself something to do by thinking you can honestly time the time to get out and then correctly time the time to get in without missing out on the big important moves up in the future. Don’t delude yourself… Discipline wins over active trading by the seat of your pants.
Who would have thought the paper was really just paper?
As for the argument between inflation and deflation, my analogy is of an island sinking beneath the water. As the lowlands of the discretionary economy got progressively worthless, the highlands of hard assets, commodities, safe property, etc. become increasingly more valuable. This isn’t that apparent historically because those economies which usually suffer from inflationary monetary practices don’t have much of a discretionary economy to begin with.
My suggestion, when the dam breaks and all that paper washes back into the US, is that we give credit where credit is due and put Reagan’s picture on the million dollar bill. Then we can put the two Bushes on the ten and hundred million dollar bills. That way you will know who to thank when you buy a loaf of bread and don’t get any change back.
i agree to some extent…
but what if i said…sell when things are imminent (i moved my 401k to money market in Nov-Dec 2007…it was very obvious back then that good days are over).
and buy when you feel things are done.
i dont care if i miss a 5-10% rally…..i will wait till it becomes obvious that we are not going downhill..
and all indicators are pointing to that fact….that we are not done yet….
its quite possible that we may have gotten just started….but only time will tell.
“Two hundred month.”
“Two hundred week.”
“Two hundred day.”
ALL A NUMEROLOGICAL CROCK promulgated by charlatans.
How about the 200 minute moving average, wonder what that shows?
Or the 200 second moving average? Or the 200 year moving average? Or the 200 fortnight moving average?
Total BS, start to finish.
Come on, BR, you can do better than this; you might as well throw virgins into volcanoes after examining their entrails.
Read my earth-shattering predictions!
1. The Sun will rise tomorrow.
2. Water will continue to be wet.
3. You can confidently depend upon gravity to keep your fine china in place.
NOW, pay me lots of money!
Hey BR. Do you know what new restrictions the SEC is going to place on short selling? From the looks of this rally, everyone but retail knows what is going to happen and the new restrictions are going to make it really hard to short.
Can’t believe the government has resorted to actively and blatantly propping the market. How have we gotten to this place because this is definitely NOT what capitalism is.
Bah @ 2:58:35 PM
Back in the year 1966, what advice would you have given to a guy who was 45 years old and saving for retirement?
Buy and hold?
BR you can do better. Where was this guy 3000 points ago.
Besides everyone knows its the 200 year moving average that dictates things
This is not a secular bear market for stocks as an asset class like 00-02….However, for certain industries and sectors (housing & financials) it most certainly is. If you had overexposure to energy & materials you have weathered this downturn just fine. It is my contention that this is a cyclical recession and cyclical bear market for stocks as an asset class. For stocks to reach the prior bear market lows I feel that 2/3 of the remaining financial institutions will be no more. I find that notion to be tough to swallow. Could it happen? Sure. Although I am a conservative, I believe that if Obama is elected it will unleash a massive Q4 spending spree and completely reverse sentiment on the second wednesday in november. Perception is reality, not just on the way down. If these trends are truly irreversible, then eventually they will bear out. Nothing goes in a straight line all the time. MA is my Obama stock and I am already long.
The 1966 call is obvious. Buy Gm, I cant remember if it was 60 or 90 a share. Retire in a pota potty.
Someone keeps bringing up Dennis Kneale, but since I have already referred to my “biggest tool on CNBC” poll in another of BR’s threads today, I won’t mention it here.
Having said that, let me take the Dennis Kneale / optimistic / bullish side of the argument. “They”, whoever they are, have managed to fix oil prices recently, haven’t they? “They” got Wachovia to rise up by billions in market cap after a disastrous 2Q. “They” always find a way to take the littlest ittiest bittiest hint of not bad news and turn it into a major rally. “They” can represent inflation at 2% when your gasoline, your food, your clothes, your heating, everything seems to be going up by 10, 20, 40%. “They” have managed to win the last two Presidential elections, by getting the rest of “us” to vote against our own economic interests. “They” have a Presidential candidate who shouldn’t even be in the same election as ours, but somehow the polls are close and “they” actually were leading in one poll, despite all the complaints I have heard for eight years from “us”. I may talk a lot, but I won’t bet against the market, because “they” are pretty darned good.
As Artie used to say on the Howard Stern show, “Waah, waah, waah…”
“So the major indices are going down another 25 to 47%–Waah, waah, waah.
“So you’re selling your CDOs at 5 cents on the dollar–Waah, waah, waah.”
(And why 47%? Why not just say 50%? Oh well, waah, waah, waah.)
It is now impossible for the Republicans to win. The Democrats will be given a chance to right the wrongs. Hope they don’t blow it too.
I’m not sure if financials — a sector plagued by huge write-downs, shareholder dilution, and fears of insolvency — is a bellwether for all stocks. That said, we are in a secular bear market (that started in 2000), and multiple compression is to be expected.
Some stocks seem too cheap already though. For example, XOM trading at less than 8x next year’s earnings. I know this fellow was referring to indexes, but think about this in terms of individual stocks: why should a stock like XOM drop another 25%-47%?
I see nothing in the financials’ charts to convince me they’re at a bottom.
I see many, many broken charts in this market and really only 2 things I like (both completely counterintuitive):
– some double-bottoms in retail.
– some island bottoms in managed care providers
– a couple of pharma charts, but most are still just a mess
Why should the stock market as a whole go down? Since all risk seems to be transferred to the government, the real risk seems to be with the dollar. Yes, the banks and American car companies are tanking for good reason, but stock in Exxon will be worth more in ten years than cash or even treasuries.
Everyone thinks this is a classic recession, but they are caused by the government tightening the money. That makes the money more valuable then stocks in a recessionary economy, but this is an entirely different pony.
I am not a huge bull. But look back to the 2000 highs in the sp of 1450ish, adusted for inflation that index would need to be at 1800 today just to stay even in real terms. At 1200 we are already down 33% in real terms. Tack on another “47%” from here that would leave the sp and roughly 600 in nominal terms. In real terms a decline of 65% from the 2000 highs would put this mkt in league with the 30s and 70s. It is bad, but is it that bad?
“centrist” is getting there. The Dow is down over 70% in terms of gold/commodities since the nominal top in 2000. If the market catches up to this, and there is no support below, you’d better believe that the market can go to “roughly 600” in nominal terms. Actually a little lower. Check the 1974-1975 lows. The problem is that virtually everyone investing today got their start in the perpetual bull market after those years. Buying and holding paid off, in most cases, in stocks, bonds, and real estate.
They are in for a rude awakening, but as prices come down the value hunters will always see stocks as being even better bargains.
We have a massive deflating debt bubble in many cases worse and larger than the one that deflated in the 1930s. Stocks could go down 90% in nominal terms. You think it can’t happen? Why shouldn’t it? We had massive asset price inflation created on the back of a ponzi scheme debt based economy that has ended. The game has ended and we need a new financial system. The gales of creative destruction will work their magic.
Bah @ 2:58:35 PM
Dollar cost average my ass. If I would have done that with my 401k it would be down 20%. Instead I’m holding cash and will re-enter the market after black soonday. Then I will laugh because the $ that was in your portfolio will be in mine. Happy Trading.
Who cares about “the market”? The only stocks you need to worry about are the ones you own. Recall my mention of XOM yesterday. Its conference call is tomorrow. There isn’t going to be any announcement of write-downs of CDOs. There isn’t going to be any dilutive capital raising announced (on the contrary, XOM will announce it has bought back more of its own stock), there won’t be a loss (instead, there will be probably record profits), etc. Not every stock is Merrill Lynch.