Is This Market Dip A Buying Opportunity? [View article]
Hi GD,
The short answer is most definitely not yes. Markets go up AND down, you can’t buy every little dip but instead you need to time your entries (in my opinion).
The Balenthiran Cycle (from my book “The 17.6 Year Stock Market Cycle, Connecting the Panics of 1929, 1987, 2000 and 2007”) is calling for a big low in 2013 based on 100 years of historical Dow data. To refine things further I wrote a SA article which had a cycle top last week (OK I was wrong, it looks like it was this week :-) ) and a low by St Leger Day (a UK horse race on 14th September 2013).
In summary, I believe in buying when the cycle says so combined with price action (buy low) and the Balenthiran Cycle has been flashing red (cycle high – sell) and price action and sentiment has been incredibly bullish (sell high).
One of the reasons that I started my research is that other analysts work was flawed for the very reasons you mention (shifting goal posts), and as such was useless as a predictive trading tool. I won’t make up excuses for being wrong. It may be that some of my assertions were wrong or that we learn more as the cycle unfolds, but I will be straight with my short-comings if I am wrong.
My reason for publishing a book was to be “on the record” with my theory and my appearance on CNBC helped me publicise that theory and make a very public forecast. I have made some specific calls in my book and I have done this as it will be easy to determine whether they were right or wrong (stocks low in 2013, stocks bull starting in 2018, gold top in 2015).
Fall 2013 will be very interesting and I can’t wait to see what unfolds over the next few months.
The 17.6 Year Stock Market Cycle (my book) has some very clear forecasts in it, the key one being a low in 2013 followed by another low in 2015 and the new bull market to begin in 2018.
I am expecting a low in 2013 and I believe that this will occur in the fall, however it could occur earlier or later. I will take a view based on price action during the rest of the year. If the market continues up from here without a significant correction in 2013 then I will be wrong.
I will review why and write a post here but I won’t make up excuses. It may be the approach can be refined or that it is out and out wrong. My investments are aligned to my beliefs and if I am wrong then I’ll need to change my investment approach as I want to make money in the long term.
I was right in 2007 (and sold all of my investments), right in 2009 (but didn’t have the courage to buy until 2010) and also identified a top in 2011 (which has now been surpassed), but I still believe that I will be able to buy back in during a correction this year.
In terms of the cycle above, people have been asking me when do I see the low occurring, they want more precision as long term cycles are broad as you’ll know if you’ve read my book. This article is an attempt to answer that question. As Naples says, allow a window of +/- a couple of weeks, although short term cycles appear more precise you need to factor in a window for a turn and also appreciate that what you forecast happening may in fact not happen as the cycle stops working.
I had two shorts stopped out last week and won’t be adding another despite the fact that I think we’ll get a high by the end of May. I’ll review this call in June to see how the shorter cycle panned out.
You may find this guide from Merrill Lynch useful in explaining the limitations of cycle analysis (page 21).
Based on the previous bear markets that I have studied what I have seen is that the second cyclical bear market is the deepest (2007- 2009) and following that we get cyclical bear markets with higher lows.
1940 to 42 saw a ~30% drop and 1976 to 78 a ~25% drop, but neither low exceeded the second low of the secular bear market. This makes sense if you think that conditions are gradually improving but market sentiment (reflected in earnings forecasts and increasing forward p/e ratios) has a tendency to get carried away and then corrects back once actual data is in.
As the low is due this autumn I believe there isn’t enough time for an out and out bear market so I favour the correction scenario instead.
Another option favoured by someone I correspond with is a low in 2015 i.e. cyclical bear market from 2013 to 2015. Whilst this is plausible and would fit the cycle which has another low in 2015 my interpretation is for higher lows in 2015 and 2018, as described in my book.
I agree with all you are saying with regards to sentiment, bottoms are accompanied by these things as you say. However we can get there (single digit p/es, high dividend yields etc) through earnings continuing to grow slowly over the next five years but investors not being willing to pay too much for future earnings (i.e. low p/es).
This is what has been seen historically - sideways, volatile markets that are ultimately flat over 17.6 years (as described in my book). This is what I am expecting to happen this time. Typically the second drop (2007-9) is the lowest low and the later ones are higher lows. So I don’t anticipate seeing the 2009 lows again but I do think we’ll get to low p/es etc through earnings growth over the next five years combined with a number of large corrections that further persuade investors that equities and equity funds are not for them, regardless of how inherently cheap equities become. This will set the scene for the next great bull run as fundamentals drive the market (as they should do rather than QE).
This period is similar to 1929 to 1947 and we are in 1942 (check the cycle on page 62 of my book). The conditions are similar (global debt, low interest rates, no/little growth). The difference then is that there was pent up demand after the war. But nonetheless I believe we are headed for a similar low inflation, real steady global growth conditions (a Kondratieff Spring if you are familiar with this) from 2018 onwards.
Good times are ahead, but 5 years of volatility remain.
Thanks for buying the book and for the review on your site.
I monitor cycles on the Dow but they broadly work on the FTSE for key turning points. From charts, the area of 5600 – 6000 is the target area ( so again in line with a 10% to 20% correction). Time will tell.
Thanks for your comment. From a chart perspective 12700 and 10900 are key longer term support levels and in line with the circa 20% and 30% correction areas. As the market has moved significantly higher since my CNBC interview I see the range 12000 to 12700 as the target area for this pullback now, which is also close to the 200SMA (Dow 10,000 was based on the price channel at the time which corresponded to a 20% correction from March levels). I have always thought a pullback of 10% to 20% is more but it could fall as much as 30%. My focus is time and so we need to wait and see how price action unfolds over this 17.6 week period over the summer.
I expect a top around here (week commencing 13 May 2013) and then a low around 13 Sep 2013 based on the cycle above.
The cycle diagram shows that tops occur approximately every 53 weeks (3 x 17.6 weeks) and the fact that we have gone 25 weeks without a correction doesn’t conflict with that.
Great food for thought. One thing - timing doesn’t have to be down to luck. Look at this market cycle, it has identified every major turn going back 100 years!
The cycle didn’t disappear during the 80s its just not as clear cut as a simple 4 year cycle. The article below provides a glimpse of my Balenthiran Cycle, it picks off the key dates you mention when extrapolated back (as I have done in my book).
“BTW - I just looked up your CNBC interview which was in mid-March, a couple weeks before the breakdown in a few major commodities. In your interview you stated a commodity bear market was the flip side of a stock secular bull market - which you didn't expect to take hold for another 5 years. How can you be certain the commodity breakdown isn't earlier than you expected which would provide the impetus for the next secular bull market?”
I am not certain about anything, as you say the commodity bull could have already topped. However, in my book I describe the Balenthiran stock market cycle of length 17.6 years and demonstrate that this has worked from the early 1900s to date. If the bull started now then this wouldn’t fit the pattern of the last 100 years. This is possible but not what my research is telling me. As I describe, many sources confirm a cycle of 17/18 years, so I have a lot of faith in my forecast and the reason for writing my book was to provide the basis for the forecast but also to make it public. I have provided a forecast out to 2053 using my cycle.
We haven’t seen the blow off top for the gold cycle yet (mania stage) and I firmly believe that a gold frenzy is ahead of us. Interest rates being less than inflation are the perfect setting for further gains in gold, as well as all of this money printing. The recent gold drop may indicate another deflation scare ahead but this would then lead to more printing and further gains in gold. I have long held the view that the gold top is due in 2015 and the recent fall has not changed my mind. If you follow EWT, Sept 11 to now is a wave 4 and the final wave 5 is ahead IMHO.
In my book and on CNBC I actually mentioned a correction to Dow 10,000! We shall see what the summer brings.
A large UK bank last week had its credit downgraded to junk status by Moody. Its goes to show that all it not rosy out there, hence the interest rate cuts by various central banks last week.
Thank Alphaglenn. Based on the long term 17.6 years stock market cycle described in my book I don't believe that the secular bear market is over.
I have been clear and trasparent with my views and by the end of 2013 we'll have a clear idea of how well the Balenthiran Cycle has performed in real time.
Is This Market Dip A Buying Opportunity? [View article]
The short answer is most definitely not yes. Markets go up AND down, you can’t buy every little dip but instead you need to time your entries (in my opinion).
The Balenthiran Cycle (from my book “The 17.6 Year Stock Market Cycle, Connecting the Panics of 1929, 1987, 2000 and 2007”) is calling for a big low in 2013 based on 100 years of historical Dow data. To refine things further I wrote a SA article which had a cycle top last week (OK I was wrong, it looks like it was this week :-) ) and a low by St Leger Day (a UK horse race on 14th September 2013).
http://seekingalpha.co...
In summary, I believe in buying when the cycle says so combined with price action (buy low) and the Balenthiran Cycle has been flashing red (cycle high – sell) and price action and sentiment has been incredibly bullish (sell high).
More about the Balenthiran Cycle here:
http://seekingalpha.co...
Kind Regards,
Kerry
The 17.6 Year Stock Market Cycle [View instapost]
This Time It's Different? [View article]
One of the reasons that I started my research is that other analysts work was flawed for the very reasons you mention (shifting goal posts), and as such was useless as a predictive trading tool. I won’t make up excuses for being wrong. It may be that some of my assertions were wrong or that we learn more as the cycle unfolds, but I will be straight with my short-comings if I am wrong.
My reason for publishing a book was to be “on the record” with my theory and my appearance on CNBC helped me publicise that theory and make a very public forecast. I have made some specific calls in my book and I have done this as it will be easy to determine whether they were right or wrong (stocks low in 2013, stocks bull starting in 2018, gold top in 2015).
Fall 2013 will be very interesting and I can’t wait to see what unfolds over the next few months.
Regards,
Kerry
This Time It's Different? [View article]
The 17.6 Year Stock Market Cycle (my book) has some very clear forecasts in it, the key one being a low in 2013 followed by another low in 2015 and the new bull market to begin in 2018.
I am expecting a low in 2013 and I believe that this will occur in the fall, however it could occur earlier or later. I will take a view based on price action during the rest of the year. If the market continues up from here without a significant correction in 2013 then I will be wrong.
I will review why and write a post here but I won’t make up excuses. It may be the approach can be refined or that it is out and out wrong. My investments are aligned to my beliefs and if I am wrong then I’ll need to change my investment approach as I want to make money in the long term.
I was right in 2007 (and sold all of my investments), right in 2009 (but didn’t have the courage to buy until 2010) and also identified a top in 2011 (which has now been surpassed), but I still believe that I will be able to buy back in during a correction this year.
In terms of the cycle above, people have been asking me when do I see the low occurring, they want more precision as long term cycles are broad as you’ll know if you’ve read my book. This article is an attempt to answer that question. As Naples says, allow a window of +/- a couple of weeks, although short term cycles appear more precise you need to factor in a window for a turn and also appreciate that what you forecast happening may in fact not happen as the cycle stops working.
I had two shorts stopped out last week and won’t be adding another despite the fact that I think we’ll get a high by the end of May. I’ll review this call in June to see how the shorter cycle panned out.
You may find this guide from Merrill Lynch useful in explaining the limitations of cycle analysis (page 21).
http://goo.gl/hS80q
Regards,
Kerry
This Time It's Different? [View article]
Based on the previous bear markets that I have studied what I have seen is that the second cyclical bear market is the deepest (2007- 2009) and following that we get cyclical bear markets with higher lows.
1940 to 42 saw a ~30% drop and 1976 to 78 a ~25% drop, but neither low exceeded the second low of the secular bear market. This makes sense if you think that conditions are gradually improving but market sentiment (reflected in earnings forecasts and increasing forward p/e ratios) has a tendency to get carried away and then corrects back once actual data is in.
As the low is due this autumn I believe there isn’t enough time for an out and out bear market so I favour the correction scenario instead.
Another option favoured by someone I correspond with is a low in 2015 i.e. cyclical bear market from 2013 to 2015. Whilst this is plausible and would fit the cycle which has another low in 2015 my interpretation is for higher lows in 2015 and 2018, as described in my book.
Regards,
Kerry
This Time It's Different? [View article]
I agree with all you are saying with regards to sentiment, bottoms are accompanied by these things as you say. However we can get there (single digit p/es, high dividend yields etc) through earnings continuing to grow slowly over the next five years but investors not being willing to pay too much for future earnings (i.e. low p/es).
This is what has been seen historically - sideways, volatile markets that are ultimately flat over 17.6 years (as described in my book). This is what I am expecting to happen this time. Typically the second drop (2007-9) is the lowest low and the later ones are higher lows. So I don’t anticipate seeing the 2009 lows again but I do think we’ll get to low p/es etc through earnings growth over the next five years combined with a number of large corrections that further persuade investors that equities and equity funds are not for them, regardless of how inherently cheap equities become. This will set the scene for the next great bull run as fundamentals drive the market (as they should do rather than QE).
This period is similar to 1929 to 1947 and we are in 1942 (check the cycle on page 62 of my book). The conditions are similar (global debt, low interest rates, no/little growth). The difference then is that there was pent up demand after the war. But nonetheless I believe we are headed for a similar low inflation, real steady global growth conditions (a Kondratieff Spring if you are familiar with this) from 2018 onwards.
Good times are ahead, but 5 years of volatility remain.
Regards,
Kerry
This Time It's Different? [View article]
Thanks for buying the book and for the review on your site.
I monitor cycles on the Dow but they broadly work on the FTSE for key turning points. From charts, the area of 5600 – 6000 is the target area ( so again in line with a 10% to 20% correction). Time will tell.
Regards,
Kerry
This Time It's Different? [View article]
Thanks for your comment. From a chart perspective 12700 and 10900 are key longer term support levels and in line with the circa 20% and 30% correction areas. As the market has moved significantly higher since my CNBC interview I see the range 12000 to 12700 as the target area for this pullback now, which is also close to the 200SMA (Dow 10,000 was based on the price channel at the time which corresponded to a 20% correction from March levels). I have always thought a pullback of 10% to 20% is more but it could fall as much as 30%. My focus is time and so we need to wait and see how price action unfolds over this 17.6 week period over the summer.
Regards,
Kerry
This Time It's Different? [View article]
I expect a top around here (week commencing 13 May 2013) and then a low around 13 Sep 2013 based on the cycle above.
The cycle diagram shows that tops occur approximately every 53 weeks (3 x 17.6 weeks) and the fact that we have gone 25 weeks without a correction doesn’t conflict with that.
Regards,
Kerry
Bear Pep Talk: Timing Not Required [View article]
Great food for thought. One thing - timing doesn’t have to be down to luck. Look at this market cycle, it has identified every major turn going back 100 years!
http://seekingalpha.co...
This time it's different? No, this shorter cycle is flashing red right now.
http://seekingalpha.co...
Just saying :-)
Regards,
Kerry
This Time It's Different? [View article]
I love cycles too :-)
The cycle didn’t disappear during the 80s its just not as clear cut as a simple 4 year cycle. The article below provides a glimpse of my Balenthiran Cycle, it picks off the key dates you mention when extrapolated back (as I have done in my book).
http://seekingalpha.co...
Regards,
Kerry
This Time It's Different? [View article]
“BTW - I just looked up your CNBC interview which was in mid-March, a couple weeks before the breakdown in a few major commodities. In your interview you stated a commodity bear market was the flip side of a stock secular bull market - which you didn't expect to take hold for another 5 years. How can you be certain the commodity breakdown isn't earlier than you expected which would provide the impetus for the next secular bull market?”
I am not certain about anything, as you say the commodity bull could have already topped. However, in my book I describe the Balenthiran stock market cycle of length 17.6 years and demonstrate that this has worked from the early 1900s to date. If the bull started now then this wouldn’t fit the pattern of the last 100 years. This is possible but not what my research is telling me. As I describe, many sources confirm a cycle of 17/18 years, so I have a lot of faith in my forecast and the reason for writing my book was to provide the basis for the forecast but also to make it public. I have provided a forecast out to 2053 using my cycle.
We haven’t seen the blow off top for the gold cycle yet (mania stage) and I firmly believe that a gold frenzy is ahead of us. Interest rates being less than inflation are the perfect setting for further gains in gold, as well as all of this money printing. The recent gold drop may indicate another deflation scare ahead but this would then lead to more printing and further gains in gold. I have long held the view that the gold top is due in 2015 and the recent fall has not changed my mind. If you follow EWT, Sept 11 to now is a wave 4 and the final wave 5 is ahead IMHO.
Regards,
Kerry
This Time It's Different? [View article]
In my book and on CNBC I actually mentioned a correction to Dow 10,000! We shall see what the summer brings.
A large UK bank last week had its credit downgraded to junk status by Moody. Its goes to show that all it not rosy out there, hence the interest rate cuts by various central banks last week.
Thanks,
Kerry
This Time It's Different? [View article]
Regards,
Kerry
This Time It's Different? [View article]
I have been clear and trasparent with my views and by the end of 2013 we'll have a clear idea of how well the Balenthiran Cycle has performed in real time.
Regards,
Kerry