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Strategies & Market Trends : IDIOTVILLE.COM
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To: Ron who wrote (175)6/16/2002 8:35:39 AM
From: lee0   of 181
 
Hmmm. I follow a rather old school way of measuring bull and bear markets. Since the market is a bear I will state what I believe are 3 phases of a bear market.

1. The Panic, this is the point in which everyone and their brother tries to sell at one time. Any previous estimates of “The New Economy” are dropped (fast). At this point trade keeps up for a while, but in the end the collapses in stock prices have been quickly communicated to the current business cycle. (This is because stock prices closely reflect credit, the life if trade.)
2. The adjustment of prices to declining earnings, which is usually accompanied by a persistent decrease in the demand for and price of goods.
3. The final period. This is the period that may last for a short time (1-4 months) or a long time (6-18 months) The period of forced liquidation, (I think that people today call it capitulation. <G>) when the market is abandoned by one group after the another. During this time stocks are sold regardless of value.

At some point between 2 and 3 the economists step in and tell us all how to avoid stage 3 probably with some elaborate scheme to manipulate the nations money. Ok, I guess the first stage of a bull market would be a good place to end.

1. The rebound from depression lows, where forced liquidation reduced the price levels of many stocks to less then their current net current asset values. At this point in the stock price trend, the prices of goods have normally sharply declined. A substantial part of both consumers’ capital and goods are worn out and interest rates are relatively low.

And then there is that little thing in Dow Theory that you draw a line connecting the major high points. If the line is pointing on the sinister diagonal then you are in a bear market. Last time I checked all major highs for the past couple years are on the sinister. Why would I be a raging bull? Or a bull at all for that matter! I think that we are getting near the end of point 2 in this bear market. There still are a lot of people screaming bull something needs to shut them up. I would not be surprised if a bottom is not reached in the DOW until it hits 7000 and the S&P 800. What I just attempted to explain was a major trend. Not the intermediate trends that compose the major trend.

Just a thought. Feel free to throw stones for what good it’s worth.
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