tradersystemguru

They Call This a Bear Market?

Interesting comments. You are certainly not the first to proclaim an end to the bear market. But each one of the indicators with the exception of the last are very short-term and also indicate the beginning of a bear market rally... Would love to see your research showing that valuations show a bottom. All my research indicates that valuation metrics like 3-month trailing and forecasted PEs have a poor record in helping anticipate turnarounds...

Challenges with the bear market is about to end hypothesis are;
1) It is heavily dependent on what happens in the real estate market and given that real estate cycles are 18.5 years long and have only been contracting (price) for little more than a year, would seem to point to the fact that we are still early in the correction phase.
2) We have just come off the top of the largest number and scope of asset bubbles in history. As Jeremy Grantham pointed out some months ago, such events have ended neither quickly or without significant pain in the past and take years not months to run their course.
3) If you buy into the valuation argument, Robert Shiller who uses trailing 10 year PEs says that current valuations around 20 are anything but cheap. Corrections in the past have seen valuations drop below 10 before the cycles turns back up.
4) Most of the major sectors (financials, auto & truck, RV, retail and banks) that turn down in advance of the S&P500 in a recession are still heading lower. This does not suggest that a sustained turnaround is in the offing anytime soon (see tradesystemguru.com/co... ).
5) Economic indicators continue to show deteriorating conditions such as consumer spending, durable goods, consumer sentiment, jobs etc. While many tend to lag, a number have just begun to turn down and once begun, these trends do not generally reverse quickly.

In other words, while I agree that we could be near to the beginning of yet another bear rally, I see little evidence of major reversal in the cards anytime soon.

Matt Blackman - TradeSystemGuru.com