To: Scotsman who wrote (27390 ) 1/1/1998 9:13:00 PM From: Rarebird Read Replies (1) | Respond to
The classic definition of a Bear Market is that it lasts on average about 9 months in duration and the major averages decline 20%-25% percent. By the time you get actual confirmation of a Bear Market, it's usually to late to do anything but sell in panic. What type of confirmation am I talking about? In the case of the Dow, a close below 6975, would create a panic selling situation and easily bring the Index down to about the 6000 level. The major indexes and large caps ( like GE, PG, etc....) are the last to break. Smaller caps, like Cube, break down first and get hit the hardest. Although we have had sharp corrections in 87 and 90 ( about 20% ), we haven't had a long drawn out Bear Market since 73-74. I don't expect this Bear to be as severe as that one ( almost 50% decline ). The 94 Bear didn't affect the averages; it just brought 80% of all stocks down at least 20% ). The Nasdaq, along with most technology stocks, are clearly in a Bear Market here. Lower highs and lower lows have been achieved. A triple top is in place on the Dow and S@P since the August highs. I expect them to roll over and hit new lows for this move. I agree with you that Bear Markets are great times to be buying beaten down companies. But one has to be careful. It's very hard to pick a bottom. Cube can serve as a good example here. Many have thought Cube would bottom at $20 or $17. We've hit $15.75 and no bottom is evident yet. It's safer but less sexy to buy a stock like Cube at a higher price once a trend reversal is clearly in place. A decisive close above the $22.5 level
