count seems like it needs a 4 here, with a final capitulation still to come.
Last May until July most likely was Wave 1 of 3. The recent waterfall of the past couple of months is as 3 of 3 as one could possibly imagine. Seems that the index needs a 4/3 bounce, which may be substantial, and then a swing down to complete the entire Wave 3 since May.
After that -- a larger rally / consolidation (W4) into the winter / spring months, to be followed by a Fifth wave down later next year, to complete an impulse.
Wave 1 from October of last year until March took about 5 months. The Fifth may last more than that, or less - but in either case it will not be a minor affair.
As far as the entire structure of the past several years is concerned, I am inclined to think that it is all part of the same Bear process since 2000. Think about it - the Nasdaq got devastated in that first leg down (NDX never made it up to a 38% recovery level). The more traditional, broader part of the economy and the markets did far better. This time, Tech is actually relatively stronger - and the "safe" Old Economy is getting gutted. First, the aggressive "early adapters" get destroyed, and "traditionalists" do relatively well (thereby confirming their convictions). Now, of course, it is the latter group that is losing the most. If you wanted to "design" a plan for a secular bear market which would last for about a decade and a half, you would simply have to think up something along the lines of what we are witnessing.
I think it is more "constructive" to think of everything since 2000 as one single secular bear.
One (long term) consideration ought to be that financial markets may "uncouple" from the economy. The DOW bottomed in July 1932, when the economic troubles were still accelerating. Overall, 1929 - 32 Bear was brutal. First, a decline and the Crash in October of 1929, then a strong rally until April of next year - and this is when the REAL trouble only started -- a relentless decline for the next 27 months. Hope we don't see anything of the kind.
WRT the decline of the last 12 months, I posted on the wiggle thread the following - I think it makes sense:
...you need 3 factors in order to have people become deeply disappointed and turned off and pessimistic towards equities. 1st - you need a decline in prices. 2nd - you need multiple disappointments, serial heartbreaks (aka, failed reversals). And last but not least - you also need TIME.
So far only the 1st factor had a real impact.<i/> |
