Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
UK Election Seats Forecasts - Tories 326, Labour 241, SNP 40, Lib Dems 17 - 12th Dec 19
UK General Election 2019 Final Seats Per Party Forecast - 12th Dec 19
What UK CPI, RPI INFLATION Forecasts for General Election Result 2019 - 11th Dec 19
Gold ETF Holdings Surge… But Do They Actually Hold Gold? - 11th Dec 19
Gold, Silver Reversals, Lower Prices and Our Precious Profits - 11th Dec 19
Opinion Pollsters, YouGov MRP General Election 2019 Result Seats Forecast - 11th Dec 19
UK General Election Tory and Labour Marginal Seats Analysis, Implied Forecast 2019 - 11th Dec 19
UK General Election 2019 - Tory Seats Forecast Based on GDP Growth - 11th Dec 19
YouGov's MRP Poll Final Tory Seats Forecast Revised Down From 359 to 338, Possibly Lower? - 10th Dec 19
What UK Economy (Average Earnings) Predicts for General Election Results 2019 - 10th Dec 19
Labour vs Tory Manifesto's UK General Election Parliamentary Seats Forecast 2019 - 10th Dec 19
Lumber is about to rally and how to play it with this ETF - 10th Dec 19
Social Mood and Leaders Impact on General Election Forecast 2019 - 9th Dec 19
Long-term Potential for Gold Remains Strong! - 9th Dec 19
Stock and Financial Markets Review - 9th Dec 19
Labour / Tory Manifesto's Impact on UK General Election Seats Forecast 2019 - 9th Dec 19
Tory Seats Forecast 2019 General Election Based on UK House Prices Momentum Analysis - 9th Dec 19
Top Tory Marginal Seats at Risk of Loss to Labour and Lib Dems - Election 2019 - 9th Dec 19
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19

Market Oracle FREE Newsletter

UK General Election Forecast 2019

Is This a New Stocks Bull Market?

Stock-Markets / Stocks Bear Market Apr 15, 2009 - 07:52 AM GMT

By: Michael_Swanson

Stock-Markets

Best Financial Markets Analysis ArticleA month ago when this rally began most people were skeptical, but now all anyone is asking is how much higher will the market go? It is still down for the year, but now almost everyone is looking for the rally to continue from here - with many thinking this may be the start of a new bull market.

Many people are wondering whether or not this is the start of a bull market and whether they should buy now. Most guests on CNBC have been gushing over the market rally and some of the recent earnings reports.


My view is that it is one thing to try to play a rally like this but another thing to buy into it as an investor who wants to buy and hold.

In no way do I think it is time to start to do that yet.

Let me show you why.

One thing that has characterized the market the past few months is extreme volatility. You know this yourself from the wild swings we have seen in the market, but it also shows up in several key technical indicators that I follow closely. For instance the VIX, which measures the premium being paid for volatility in the options market, has been trading above 40 all of this year - something that is has never done for such a long period of time before.

At the same time the 200-day Bollinger bands, which measure the long-term volatility in prices(the bands contract when the intraday volatility in a stock or index shrinks and widens with greater volatility) have remained at an extreme distance between one another.

Both of these indicators are trading at levels not even seen in the last bear market.

When this bear market comes to an end these indicators will move back to their more normal levels. In other words the extreme volatility in the market will begin to dissipate.

Stocks will enter a trading range and at some point simply drift.

Heightened volatility is typical of a bear market and once bear markets end markets tend to go through what I call a stage one basing process which paves the way for a new bull market. During this time on the charts the 200-day Bollinger bands come together while the 150 and 200-day moving averages flatten out as the market trades around them for months.

Once this bear market comes to an end I expect we'll see a sharp rally in the market and then 6-12 months of stage one consolidation that builds the base and technical patterns needed for a new bull market.

A lot of people are thinking that this is the start of a new bull market or a rally that will last for months. I'm still bearish on the market and believe we won't see a real bottom until next year, but right now I want to give the bulls the benefit of the doubt. There is nothing certain in the stock market and if you want to make money in the market you always have to be open to changing your opinions and consideration of the other side of the story.

If this rally represents the end of the bear market I would expect the market to perhaps rally a bit more over the next 4-8 weeks, but then to make a major top and dive down to at least give up half of its gains on this move or even to fully retest its March lows. It would then bounce back up and enter a trading range for the rest of the summer - and maybe even into the end of this year. It took a full eight months of base building after the July 2002 stock market bottom for the stock market to enter a bull market and with volatility even more extreme this time it may take even longer for the market to enter a new bull market if it bottomed last month.

In other words after making a peak somewhere over the next few weeks I would expect that top to represent massive resistance for the stock market going forward - it will represent a major resistance point for the stock market for the rest of the year no matter whether the market has put in a bear market bottom or not.

In the most bullish of scenarios the market would simply enter a trading range.

What this means for you is that there is no need to buy stocks now with the intention of buying and holding for a long time. You would be better off to be patient and to see what happens once the current rally comes to an end.

Watch what happens on the next correction - will volume pickup or dissipate? Will many stocks participate in a decline or will many sectors and individual stocks simply hold up and display a powerful positive divergence from the market and hint that a healthy consolidation phase is indeed beginning?

The market will tell us over the next several months whether or not this is the start of a new bull market or just another bear market rally. If it is going into a base building phase then I would look to be a trader for several months of tops and bottoms with the view of eventually buying for the long-term sometime next year.

One good thing is that such an environment would probably enable a few sectors to go up into new bull phases ahead of everything else. Gold would be the primary candidate to do this since if the market did bottom part of the reason would be the money printing on the part of the Fed.

Now I say all of this thinking that this is just another bear market rally myself. I just wanted to talk with you about the other side of the story today and what would happen if the market had indeed put in a real bottom - some of the things to look for that would prove it to us and some ideas on how money would be made going forward.

There is no need to simply assume the market has bottomed and throw money at in in a desperate gamble. The market will tell show us when a new bull market will begin and provide a good safe risk to reward entry point.

Right now it is doing neither for buy and hold investors and that's the straight dope.

Subscribe to my free weekly newsletter for more in depth analysis of the financial markets with a discussion of individual stocks.  To subscribe click here.

By Michael Swanson
WallStreetWindow.com

Mike Swanson is the founder and chief editor of WallStreetWindow. He began investing and trading in 1997 and achieved a return in excess of 800% from 1997 to 2001. In 2002 he won second place in the 2002 Robbins Trading Contest and ran a hedge fund from 2003 to 2006 that generated a return of over 78% for its investors during that time frame. In 2005 out of 3,621 hedge funds tracked by HedgeFund.Net only 35 other funds had a better return that year. Mike holds a Masters Degree in history from the University of Virginia and has a knowledge of the history and political economy of the United States and the world financial markets. Besides writing about financial matters he is also working on a history of the state of Virginia. To subscribe to his free stock market newsletter click here .

Copyright © 2009 Michael Swanson - All Rights Reserved.

Disclaimer - WallStreetWindow.com is owned by Timingwallstreet, Inc of which Michael Swanson is President and sole shareholder. Both Swanson and employees and associates of Timingwallstreet, Inc. may have a position in securities which are mentioned on any of the websites or commentaries published by TimingWallStreet or any of its services and may sell or close such positions at any moment and without warning. Under no circumstances should the information received from TimingWallStreet represent a recommendation to buy, sell, or hold any security. TimingWallStreet contains the opinions of Swanson and and other financial writers and commentators. Neither Swanson, nor TimingWallstreet, Inc. provide individual investment advice and will not advise you personally concerning the nature, potential, value, or of any particular stock or investment strategy. To the extent that any of the information contained on any TimingWallStreet publications may be deemed investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Past results of TimingWallStreet, Michael Swanson or other financial authors are not necessarily indicative of future performance.

TimingWallStreet does not represent the accuracy nor does it warranty the accuracy, completeness or timeliness of the statements published on its web sites, its email alerts, podcats, or other media. The information provided should therefore be used as a basis for continued, independent research into a security referenced on TimingWallStreet so that the reader forms his or her own opinion regarding any investment in a security published on any TimingWallStreet of media outlets or services. The reader therefore agrees that he or she alone bears complete responsibility for their own investment research and decisions. We are not and do not represent ourselves to be a registered investment adviser or advisory firm or company. You should consult a qualified financial advisor or stock broker before making any investment decision and to help you evaluate any information you may receive from TimingWallstreet.

Consequently, the reader understands and agrees that by using any of TimingWallStreet services, either directly or indirectly, TimingWallStreet, Inc. shall not be liable to anyone for any loss, injury or damage resulting from the use of or information attained from TimingWallStreet.

Michael Swanson Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules