Tony: Founder of KhronoStock.com and KhronoStock Blog Network
A second look of a possible deceptive bull rally within a bear market is offered by our contributing analyst Mike of Movermike.com
By movermike ⋅ July 24, 2009 ⋅ Post a comment
I visited Richard Russell’s Dow Theory Letter to confirm the news; the DJIA and the DJTA are in gear. Both averages moved into new high ground since the March lows. Russell’s proprietary PTI is bullish.
Russell writes,
It’s clear to me that we are in a rally within a secular bear market (some will call it a cyclical bull market). In other words, it’s coming within the confines of a long-term or secular bear market. Old timers saw this same situation during the 1966 to 1974 bear market. Russell
Why is this just a rally within a secular bear market?
What was missing at the March 9 lows? Extreme pessimism was absent as were the great values in blue-chip, dividend-paying stocks sporting yields of 6% to 10%. Russell
What haunts Russell is the question of proportion.
Can a 27-year bull market (1980 to 2007) be corrected by a two-year bear market? Most bear markets have tended to last from one-third to one-half as long as the preceding bull market. Russell
It’s a strange market. Interest rates moved higher. We are now at 4.58% on the 30-year Treasury. The June high was 4.76%. The 10-year Treasury moved up to 3.72% just shy of the 3.98 high of June. A break above 4.00% would be bad for the U.S. deficit, and housing. Gold moved higher to $949.70 and the USD came within nine ticks of the low – 78.33 – of the USD low of June. IMO, a violation of the June USD low will lead to a retest of the record low at 70.70.
It also seems strange to me that the low rates available to savers, penalize saving and allows the banks to repair their balance sheets. At least that’s the hope of the FED. If that’s the case, why is the $BKX Philadelphia Bank Index, acting so weak. It is still 6.5 points below the June high and both the 200 dma and the 50 dma are both declining and the 50 dma has not been able to cross above the 200 dma. (See chart)
Couple of points….
1. Russell thinks the bull market ended in 2007. Many others, myself included, think it ended in 2000. I guess it must be a Dow Theory thing, because it DEFINITELY ended in 2000 for the Naz.
2. The bank index is weak because outside of a handful of stocks, this market is not rallying widely. The same is true of many other second tier stocks in other sectors.
This market isn’t strange. It’s normal. It reminds me a lot of the runup to 2000, where investors disregarded reality and focused exclusively on hope. I’ve seen this many times, with the runup to 2000 being the most recent.
This rally will end the same way they all do.
“This rally will end the same way they all do.”
Then, it does what? Goes down? And then what??? Goes up again??
Not like I need an answer,,,
Are ya makin’ any money??? (Question to myself,,,and/or et al)
I can’t remember,,,did I fire, 5, or 6 bullets?? Well, DID I???
Shah, investors can disregard the facts for a long time. If you maintain your opinion in the face of the evidence, you only end up losing. The goal is to go with the flow, not fight it. Prechter has argued for years that Gold was notin a bull market and has missed a five folsd increase, Granville was another that refused to adjust his attitude and stayed wrong for years. Dow Theory has worked very well, and it is bullish until it isn’t. I shall try to point out to you when it isn’t and I hope you do the same.
right on, Mike.
I read today of some shorts who were down “40%” and I had to laugh at their utter ‘lack of skill’, of TRADING. Don’t these people pay attention to Week, Day, 60 min,,,,30 min,,,15 min,,,3,,,1 min charts? And know how to draw Trendlines, and ‘make the bet’? You out over 10% of a Trend, then it is ‘your fault’ for stayin’ in it.
Thanks for you money…
Correct ‘your fault’, and profit.
Be stubborn, and lose.
It’s about trading,,,for ME. “Investing”, in the stock market, is really being the ones that UNDERWRITE the IPO’s,,,and are the original backers of the stock/company. Other than that, we all go along for the ride. We’re just Traders, be it for 10 minutes or 10 years, or whatever.
Why beat a dead horse?
Or not drink at the fountain, when there is water in the well?? lol
If SPX goes to 1012, what next? To 1077? Then to 1144?? Think it CAN’T happen? ok,,,, As if…
Not sayin’ it will, either. I just hope it all doesn’t go to zero. Not in the mood for agricultural based or hunter/gatherer lifestyle.