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This situation reminds me of the 94 "bear market" in bonds. Bonds had
rallied for almost 3 years prior to 94 then spent all of that year
"correcting". On a longer time frame bonds retraced roughly 40% of the bull
market gain from 91, found support at the end of 94 and continued up in 95.
Now bonds are at new highs and it looks like there is no stopping them.
The same could happen in the S+P. This break is much sharper which to me
implies a top more than a correction but on a % correction basis (of the
bull trend) it's less than where bonds were at when they turned and headed
up again. However, breaks that carry this kind of momentum, in any market,
are not good news for bulls but it does not immediately usher in a bear
market or rule out a solid continuation later.
A solid base of support will have to be generated at these levels to
springboard to a higher price later. This will take at least a year. A
sharp rally back up any sooner and you run risk of blow off action --
definite topping action.
On a % basis, the S+P is no worse off now than bonds were at the end of
1994. This is good news for the bulls because look where bonds are now.
However, the bad news is that in bonds it took 1 year to correct 40% while
it took about a month in the S+P. But market characteristics could account
for this (ie treasuries just move slower than indexes).
Brian.
-----Original Message-----
From: Earl Adamy [mailto:eadamy@xxxxxxxxxx]
Sent: Monday, August 31, 1998 12:08 PM
To: omega-list@xxxxxxxxxx
Subject: Re: Rapidly changing fortunes
When I look at my weekly and monthly historical data back to early '20s, it
looks like a bear market to me. Although I've noted many similarities to
late
20's, I'm not ready to figure we're headed for a 90% decline. 25% appears
certain and, at best, I think we're in for sideways action until we get well
clear of the millenium. The other shoe here would be a change of trend in
the
US$ and that could send US equities right to the mat ala Japan and US in
'29.
Earl
-----Original Message-----
From: Neal T. Weintraub <thevindicator@xxxxxxxxxxx>
To: JParris@xxxxxxx <JParris@xxxxxxx>; omega-list@xxxxxxxxxx
<omega-list@xxxxxxxxxx>
Date: Monday, August 31, 1998 12:05 PM
Subject: Re: Rapidly changing fortunes
>What do our back testing gurus say. Is this a correction or the start of a
>bear market? Surely we have enough info. to back test. C'mon it is time to
>put all those gizmos together and give us your best shot. Bull market, bear
>market or correction.
>-----Original Message-----
>From: JParris@xxxxxxx <JParris@xxxxxxx>
>To: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
>Date: Monday, August 31, 1998 10:26 AM
>Subject: Rapidly changing fortunes
>
>
>>JAN 1998
>>
>>Corp earnings are expected to grow at 10% to 12% this year . Multiples are
>a
>>little high but the S&P 500 should produce another 20% to 30% gain. Asia
is
>>having a little trouble but it was discounted during the Oct correction.
>>Besides, Asia only accounts for 3% of our GDP and our economy looks
>fantastic.
>>In fact, it couldn't look better. There is not a cloud on the horizon.
>>
>>AUG 1998
>>
>>Where the hell did this storm come from?
>>
>>
>>If this keeps up I'm going to have to stop listening to these economic
>>forecasts and develop some trading skills!
>>
>>
>> Jim
>>
>>PS How come a bright guy like Stanley Druckenmiller only has a time
horizon
>of
>>3 to 6 months?
>>
>
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