Bearing Down

This just in....demand still stinks.

I hope that anyone who has felt this has been a bear market for a while (a normal one as I think or otherwise) is not surprised that we have made a new closing low for the S&P 500.

I've made several comments about how textbook the bear market has been, starting from rolling over slowly last fall worrying very few people, there being a good-sized feel-good rally in the spring, and the constant questioning if a bottom is in.

We can only hope that the end of the bear and transition into the next bull is just as textbook.

If so, then we might expect to see a turn-up met with disbelief a few months from now (maybe Q1 2009?). Things will start to green light when the S&P 500 goes back above its 200 DMA. Regardless of when this occurs, buying stocks at that time will be uncomfortable.

You might be thinking that it would be uncomfortable to buy stocks today, so is this a bottom? I'm not worried about the bottom. I am looking for where demand gets healthy. I can't recall hearing about demand for stocks elsewhere but the things I have been writing about all along have focused on health of demand (while qualifying this approach that it would not get anyone out at the top or in at the bottom).

The folks on TV seem mostly resigned to the fact that this is a bear market despite a few bottom callers early in the day on Wednesday. I view this as the beginning of a shift in sentiment. Resignation that there is a bear market is a step on the road to skepticism that will invariably come from the mainstream at some point.

I write a lot about this sort of thing because health of demand (the market above or below its 200 DMA) can be easily monitored and acted upon by anyone. Down zero in a bear market is not realistic, but down less is possible.

Comments

[MarvinMBA:]

This is not going to be a textbook decline and recovery. We are in unknow areas with the failure of major financial institutions, the weak dollar and inflation. All bets of how a recovery will take place and when are highly speculative. Believe it or not we could go beyond the bear into the "D" word area too.

2008 Jul 10 10:20 AM

[MarvinMBA:]

Just as a added comment. Its obvious we are now in what I call the Age of Economic Discontinuities. All bets based on normal analytical methodologies like statistics and linear projections are long since gone. Watch out below is what I'm saying.

2008 Jul 10 11:00 AM

[Larry House:]

I agree with you totally, User 118015. I think you can throw out the textbook. I get called a "doom and gloom" for my view, but what is happening now, facing a global recession, et al, is not covered in the textbooks. This economic time is unique. Even Jack Welch said to watch out for '09. We are just in the beginning of the economic rebalancing. It is foolish to talk about when the market "may" turn when we haven't begun to plumb the depths of where we are going. Better safe than sorry.

2008 Jul 10 12:19 PM