My bearish count is the same as yours AA. I see us entering 3 of 3 down on the SPX, and I think the call is similar for the Naz. I've said it before, and I'll say it again: until proven otherwise, I think the similarities are too uncanny to treat the long-term picture as anything other than a repeat of 1931 (for the Naz - I know Old Eco is different, and it's corrective pattern is far milder). I continue to see us about halfway done with this bear, now that the feedback is just engaging into the real economy. This jibes beautifully with the notion that we are just done with the first half of a two-year-long double-zigzag correction in the Naz. This remains of little concern to anyone who is daytrading, but I prefer to keep the bulk of my funds deployed for the long-term trend, and only play short-term trends when they are backed up by the intermediate and long-term picture. That way, time will always bail out a bad entry.
This count also jibes here with the seasonal patterns. September-October are reliably bad. You have negative seasonal patterns that fail in bulls, and positive seasonal patterns that fail in bears, but it is rare indeed to see a positive seasonal fail in a bull or a negative seasonal fail in a bear. The only time I would expect a seasonal to fail is if everyone is talking about the upcoming seasonal - and hence positioned for it. I don't see people fretting about the "September Effect" like they were gushing about the January Effect at the end of the bull.
Mutual fund cash levels are historically low, meaning phone transfers out immediately translate into forced selling by fund managers. The redemptions are in the very early days. Didn't someone somewhere say that all bears ultimately end with forced selling?
Also, we've had the uptick in orders in semis now. Several companies have noted it, particularly in the wireless sector. Of course, it's just the end of the cancellations, and a slight uptick as inventory levels have stopped shrinking, but the semis that were anticipating that managed to put in the recent peak on that news, and that seems to be all they got out of it - a single headfake above the 200DMA. Valuations are too high, anticipating a typical snapback cyclical recovery to the recent peak earnings levels. You can play that game in a bull market, but I don't think it works too well in a bear. As you and I both know, those earnings won't be repeated for a long time to come.
In the same spirit that I bought the dips all the way up in the great bull, I am now selling the bounces all the way down in its correction. I say we're in wave 3 of A of the second year-long zig-zag. I honestly hope I'm wrong, as the implications for the economy are unpleasant to say the least. But they are deserved. So, great Invisible Hand, what's it going to be?
BC |
