elvinkwokca's  Instablog

elvinkwokca
Send Message
Just a guy who is curious about the financial market movement. Majored in Mechanical Engineering from Nanyang Technology University and Master of Commerce (Applied Finance) from University of Adelaide. Completed CFA Level 1 and Financial Risk Manager Worked in Jabre Capital Partners... More
  • A higher probability that a bear trend is on its way!!! 0 comments
    Aug 11, 2011 10:23 AM

    With the current turmoil in Europe and in US, everyone must be guessing the direction of the trend in the next couple of months or maybe for the next year. Market volatility has risen a lot, one day you see it to be positive and another day you see it to be negative. There seems to be bad news every month, it seems that a sign was given to us naturally with turmoil in Africa/middle east, earthquake in Japan, Greece bailout, US debt ceiling and now the current European sovereign crisis. Maybe it's a sign for the big breakout!!!

    A simple analysis was carried out based on using the historical prices of S&P 500 (from 2000 to current) to justify that a bear trend is on its way. The data was tabulated based on the number of down days and up days in term of daily fluctuation based on +/- 0%/1%/2%/5%



    #1 Downtrend cycle (From March 2000 to September 2002) = 629 days (2.42 years)
    a) No of down days = 54.21%, No of up days = 45.79%
        Down/Up = 1.18
        No of down 1% day = 23.69%, No of up 1% day = 19.24%
        Down/Up = 1.23
        No of down 2% day = 7.31%, No of up 2% day = 6.04%
        Down/Up = 1.21
        No of down 5% day = 0.16%, No of up 5% day = 0.48%
        Down/Up = 0.33
    Market declined by 45.83%

    #2 Uptrend cycle (From September 2002 to July 2007) = 1204 days (4.63 years)
    a) No of down days = 44.77%, No of up days = 55.32%
        Down/Up = 0.81
        No of down 1% day = 9.55%, No of up 1% day = 9.88%
        Down/Up = 0.97
        No of down 2% day = 1.16%, No of up 2% day = 1.74%
        Down/Up = 0.67
        No of down 5% day = 0%, No of up 5% day = 0%
        Down/Up = Error
    Market rallied up by 90.43%

    #3) Downtrend cycle (From July 2007 to March 2009) = 413 days (1.58 years)
    a) No of down days = 50.36%, No of up days = 49.39%
        Down/Up = 1.02
        No of down 1% day = 27.12%, No of up 1% day = 21.07%
        Down/Up = 1.29
        No of down 2% day = 14.29%, No of up 2% day = 10.17%
        Down/Up = 1.41
        No of down 5% day = 2.18%, No of up 5% day = 1.21%
        Down/Up = 1.8
    Market declined by 55.95%

    #4) Uptrend cycle (From March 2009 to April 2011) = 541 days (2.08 years)
    a) No of down days = 41.96%, No of up days = 58.04%
        Down/Up = 0.72
        No of down 1% day = 13.49%, No of up 1% day = 15.9%
        Down/Up = 0.68
        No of down 2% day = 3.51%, No of up 2% day = 5.18%
        Down/Up = 0.85
        No of down 5% day = 0%, No of up 5% day = 0.37%
        Down/Up = 0
    Market rallied up by 99.08%

    #5) Current trend cycle (From April 2011 to Current) = 102 days (0.51 years)
    a) No of down days = 51.96%, No of up days = 48.04%
        Down/Up = 1.08
        No of down 1% day = 20.59%, No of up 1% day = 17.65%
        Down/Up = 1.17
        No of down 2% day = 10.78%, No of up 2% day = 5.88%
        Down/Up = 1.83
        No of down 5% day = 0.98%, No of up 5% day = 0%
        Down/Up = Error
    Market declined by 16.66% as of 23rd Sept

    Based on the data, you would have noticed that
    i) Downtrend cycle seems to hit bottom in a shorter duration as compared to an uptrend cycle.
    ii) Downtrend cycle has a down/up ratio of more than 1 where-else uptrend cycle has a down/up ratio of less than 1 except for cycle 1 where returns of +/- 5% failed to hold.
    iii) Downtrend cycle tends to have a higher % of +/-2%

    If the past holds, it seems that there are a higher probability that a bear trend is already on its way and we have yet to hit the bottom and the bottom seems to be at least 45% from the top. The recent uptrend duration of 1.48 years as compared to the previous uptrend duration of 3.29 years seems to also tell us that market in fact has went up too much due to overreaction of the recovery of the economy.

    Time will tell us whether we're in a bear trend...





    Disclosure: I am long SPXU.
Back To elvinkwokca's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

  • EU has forgo the integrity of the European people by continuing to bail-out Greece when they failed to meet the target.
    Oct 11, 2011
  • Greek army and police should stop protecting the politicians and allow the public to storm the parliament...
    Sep 26, 2011
  • Greek Prime Minister George Papandreou should resigned. He's a disgrace to Greeks
    Sep 21, 2011
More »
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.