Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Forecasting the Anatomy of the Stocks Bear Market Bottom

Stock-Markets / Stocks Bear Market Mar 05, 2009 - 01:32 PM GMT

By: Donald_W_Dony

Stock-Markets Diamond Rated - Best Financial Markets Analysis ArticleFinancial forecasts, whether they are fundamentally or technically driven, are a combination of probabilities and assumptions. For example, when an analyst indicates that the earnings for a company are expected to increase during the next quarter and the business is now trading below its intrinsic value, he is suggesting that the probability of a number of issues should positively affect the near-term earnings outlook for this organization.


The assumption is that companies who trade below their true worth will eventually rise up to their intrinsic value. In other words, the fundamental evidence indicates the company is undervalued and the stock price will reflect this by advancing sometime in the near future.

This probability analysis also applies to a technical review. Mathematical models can show where the greatest likelihood of major lows will develop in the future and, coupled with historical data, the time frame for the bottom of the bear market can be estimated.

Models (lower portion of Chart 1) indicate that there are two anticipated troughs coming for the S&P 500 in 2009. As a bear market in its most simplest form is nothing more than a series of lower lows, the assumption is that price levels will be under the current price levels for the June and October troughs.

Since 1946, there has been 12 bear markets. Six of these lows have developed in October and three have occurred in May and June. This would suggest that there is a 75% probability of this current bear ending on one those months.

With evidence and assumptions dictating that the final low should occur this year, how will the bottom unfold? Bear market lows develop in three basic forms. Indexes either test a new low level once, twice or three times before starting a new bull market. In Charts 2-4 of the S&P/TSX, Dow Jones World Stock Index and the S&P 500, the three standard bear market bottoms are illustrated. The S&P/TSX reached a final low only once in October 2002 and than advanced. This was largely due to the strength of commodities.

The DJ World Stock Index (Chart 3) also touched down to a new low in October but retested the same level again in March. The S&P 500, however, needed three tests at the 780 level before sufficient buying pressure occurred and propelled it into a bull market.

Bottom line: Bear market bottoms can develop in any of the three forms. However, as global equity markets are tightly linked, they typically all reach their lows during the same months and often on the same day. With models indicating that major troughs are expected in June and October this year and another in March 2010, there is a 75% probability that the last bottom of this severe bear market should occur in June or October and with a possible retest in March. The assumption is that the end will develop this year verses June or October 2010.

Additional research can be found in the March newsletter. Go to www.technicalspeculator.com and click on member login.

Your comments are always welcomed.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2009 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present.  He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.   

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms.  He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

Donald W. Dony Archive

© 2005-2022 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