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If we are indeed in a bear market to correct the over extended
bull from either the 74, 82, or 87 low, only the NASDAQ really has begun to
decline. Right now the S&P is down 13% from its high, the Dow 11.3%
and the NASDAQ 45.6%. A comparable decline for the SP and DJ take them to
831 and 6254 respectively. Considering the duration and degree of the
increase, those numbers would be well within range of a relative decline.
For comparisons sake the Nikkei declined 67% from its 1990 high.
Comparable numbers for the SP, DJ, and NASDAQ would be 504, 3828, and
1681.
Each generation seems to have one major bear market that takes
>15 years to make lasting new highs. The high of 1929 was not
permanently eclipsed until the mid 50's (1956 I think). The highs of 1966
were not permanently eclipsed until 1982. The Nikkei is still 60% below
the high it made in 1990. Using these generational bears as a guideline,
we would not permanently make new highs until 2016-2037. This does not
mean that we decline until then. Most of the declines would be complete
within a year or two of the high. The buy and hold investor probably quits
investing in equities about 2/3's of the way through this decline.
However, the real damage is done to a buy and hold investor in the preceding
years in which the market moves back and forth within the newly established
range. During this period of 0 appreciation of his assets and decreased
earning in the business world, the investors carefully
planned retirement spreadsheets begin to fall apart. After a
decade of said action, the investor begins to believe the new conventional
wisdom which is that equities will not ever eclipse 'X' because of 'YZ'.
Nonetheless, our conscientious investor begins to pull his/her money out of
equities.
We are most probably going to have a generational bear market
beginning in the next 5 years if it has not already begun. I believe that
said decline has begun because we are nearing as Robert Miner puts it,
an overbalance of time and price. The current decline has lasted longer in
time and price than the easily erased corrections of 95-99. The previous
corrections ended with violent reversals of giant down days. New highs
were only a week or two away. During this decline we have had several
violent down days and sudden reversals; however, those reversals higher have
failed. Lastly, 'technology', personified by the NASDAQ, has driven the
final acceleration of this rally beginning in 1995. The NASDAQ has nearly
lost 50% of its value already. I expect it to lose 80%.
My long term opinion would change with a cash SP close over
1460 or so.
sb
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