Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy Government PANICs! Sterling Collapses! - 19th Mar 20
Coronavirus Market Crisis - Nowhere to Hide! - 19th Mar 20
Coronavirus Most Likely GDP Economic Outcome for Q1 and Q2 2020 - 19th Mar 20
How COVID-19 Leads to 2008-Style Bank Crisis - 19th Mar 20
Coronavirus Impact on Global Economic GDP Numbers - 19th Mar 20
Bticoin Crash Big Channel Review - 19th Mar 20
Gold is Doing Its Job…Silver Will Come Back as a Safe-Haven Asset - 19th Mar 20
The Chartology of Coronavirus Deflationary Event - 18th Mar 20
Fed Slashes Rates to Zero and Introduces QE in Response to COVID-19. Will Gold Rally Now? - 18th Mar 20
Coronavirus - Nothing to Fear but Fear Itself - 18th Mar 20
The Stocks Bear Market Is Upon Us... Or Not - 18th Mar 20
US and UK Coronavirus Containment Incompetence Resulting Catastrophic Trend Trajectories - 17th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

Is U.S. Stocks Bull Market's Death Imminent?

Stock-Markets / Stock Markets 2015 Apr 21, 2015 - 04:33 PM GMT

By: Clif_Droke

Stock-Markets

A common refrain from commentators over the last year or so is that the bull market in U.S. equities is “long in the tooth.”  The very use of this phrase implies a market which has reached a stage of decrepitude from which only bad things can result.  “Long in the tooth,” in other words, implies the imminent demise of the bull and the birth of a new bear market.


But does an old bull market necessarily give rise to a bear market by virtue of its age?  Does old age in fact kill bulls?  A careful study of market history provides a negative answer to this question.  Old age doesn’t kill bull markets; in fact, it’s not uncommon for equity bull markets to last 8-9 years before they terminate.  For perspective, the present bull market has only just entered its sixth year.

If anything, age “mellows” a bull market in much the same way that it mellows wine.  The early phases of a new bull market are often characterized by wild volatility and uncertainty.  As market sage Richard Russell once observed, “The early stage of a bull market…always tests the nerves of the participants.  The bull will try to advance while attracting the fewest possible numbers of ‘riders.’”  That’s exactly what the U.S. equity bull market did in its infant stages between 2009 and 2011 (remember the infamous “Flash Crash”?)  Indeed, there weren’t many analysts who were willing to go on record in those years to proclaim that a new secular bull market was underway; most cautiously referred to it as a either a “cyclical” bull or an extended bear market rally.

The second half of a bull market (prior to the final “distribution phase”) is typically characterized by declining volatility and by a decisive upward bias that is all but impossible to ignore.  This what can be termed the “momentum phase” of a bull market.  It’s during this phase that retail investors come to accept the reality of the secular bull market and begin participating without the trepidation that characterized the bull’s early years.  Low volatility is absolutely necessary, from the standpoint of the insiders, to establishing the bull’s claim and luring the public into the market.  Without widespread public participation there can be no culmination of the bull market since the “smart money” has to have someone to sell to.

The proof that a secular (long-term) bull market had been birthed in 2009 wasn’t evident to the majority of investors until 2013.  It was during this year that the Dow and S&P 500 finally overcame their previous highs made in 2007.  Viewed another way, it was only two short years ago that the U.S. equity market reached the “break even” point from 2007.  The gains that have been made since then can be viewed as the “real” start of the momentum phase of the bull market.  At only two years of age, the momentum phase of the bull market has a ways to go before it gives way to the final stage of a secular bull market, namely the “distribution phase.”

No bull market can end until the distribution phase commences.  As the name implies, distribution involves the selling of equities by “smart money” participants who wish to finally cash out of what has been (for them) a long and profitable bull run.  Since they can’t sell to themselves, they must bring the public into the market in order to unload their holdings onto the unsuspecting small investor.  Distribution phases are always marked by glaring advertisements for stock ownership in the form of news articles in the popular press, TV shows, Internet advertising, etc.  The previous two bull markets which ended in the late 1990s and the mid-to-late 2000s, respectively, were characterized by this widespread advertising and public participation. 

Currently, nothing even remotely similar to those two periods can be seen.  Today the average small investor is nowhere to be found.  Still feeling the psychological effects of the late credit crisis, he is in no hurry to leap back into an equity market which he believes to be “overvalued” and “long in the tooth.”  But before this bull expires you can rest assured Mr. and Mrs. Small Investor will once again rejoin the fray, just as they did before the culmination of all previous bull markets.  Before the public enters as active participants, the secular bull market will remain very much alive.

Returning to our original proposition, if old age doesn’t kill bull markets then what does?  If you listen to the opinions of most economists your answer would be that economic recessions kill bull markets.  That belief is of equally dubious merit, however.  There have been more than a few instances in history of recessions running concurrently with equity bull markets.  In fact, the recent experience in Japan late last year is a case in point.  Even though Japan experienced two consecutive quarters of economic contraction and officially entered a recession, the Nikkei stock market index remained very much in bull market territory (see chart below).  Conversely, there have been many cases in which an equity bear market precedes an economic recession, often by a lead time of several months or even up to a year. 

In the final analysis, virtually every bull market in U.S. history met its demise due to a common factor: the Federal Reserve.  Fed policy is what kills bull markets in almost every instance.  The progressive increase in Fed interest rates and subsequent tightening of credit is what eventually chokes off demand for equities, thus culminating the bull’s run.  There’s even a Wall Street aphorism which attests to this: “Bull markets don’t end until the Fed removes the punch bowl.”  As long as Fed policy remains accommodative, the secular bull market will live on. 

The last few months have been a time of consolidation for the stock market.  As measured by the NYSE Composite Index (NYA) the market has gone essentially nowhere for the 10 months.  To many investors this lack of forward progress may feel like a bear market, but it’s actually laying the foundation for the next phase of the bull market.  Think of the sideways range as a launching pad for the market’s next advancing phase, which in turn is necessary before the final distribution/ending phase can begin. 

Performance Review

I make it a point to record the performance of the Momentum Strategies Report on a weekly basis.  I believe this is important for providing subscribers (and potential subscribers) with an accurate representation of how my recommendations have performed in the recent past.  To see this performance click on the following link: http://cdroke.blogspot.com.

Order today and receive an autographed copy along with a copy of the book, "The Best Strategies For Momentum Traders." Your order also includes a FREE 1-month trial subscription to the Momentum Strategies Report newsletter: http://www.clifdroke.com/books/masteringma.html

By Clif Droke

www.clifdroke.com

Clif Droke is the editor of the daily Gold & Silver Stock Report. Published daily since 2002, the report provides forecasts and analysis of the leading gold, silver, uranium and energy stocks from a short-term technical standpoint. He is also the author of numerous books, including 'How to Read Chart Patterns for Greater Profits.' For more information visit www.clifdroke.com

Clif Droke 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