Thursday: Investing Wisely -- Market Update & Commentary - - July 19, 2012
Note: I am moving this posting to Thursday's. I will be adding a new Tuesday Blog next Tuesday. So, today is my normal Wednesday posting, but this will move to Thursday - next week. Thanks, I hope you find these postings a positive weekly routine.
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This Thursday edition is simple, it provides more in-depth information and data than can be put in each article. It is titled: Thursday: Investing Wisely -- Market Update and Commentary. Just Scroll Down for my Market Update and Commentary.
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Please Scroll Down for My Current Opinion - and - further down for My Short-Term Horizon
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Note: This General Market Update & Commentary is a bit limited. It is completely focused on the Standard & Poors 500 Index. My reason is simple; this Index is the most followed by all investors and professional advisors. The many other Indice Indexes are also important in my analytics. You can be assured that if I make securities recommendations to my Clients, those Indexes are carefully researched.My Current General Market Opinion
In my articles I clearly have been bearish since early April. Calling this Bearish Cycle Inflection Point on the button was important and profitable to my Clients.
So, Bears are now in control of the marketplace for the foreseeable future.
Of the many proprietary indicators that have been so accurate over the years, not one is showing any indication that a meaningful bullish cycle is coming. That means the marketplace will continue to erode moving from one sector / industry group venue to another. This rotation will, or should continue until all have been sufficiently hurt. Some will begin to rebuild earlier than others. That guidance is reserved for my Clients.
On the economic front, there is mounting evidence that the U.S. will join Great Britain in being in a full recession. I suggest that the U.S. is at this time in a recession. Washington and the media, as usual will be slow to acknowledge that fact.
As for the general market, my fundamentals are over-valued. My technicals are over-bought. My consensus opinions are much too bullish. The economy is in much more peril than is being reported by the media. All the stimulus that Washington can muster will likely be politically driven in the coming months. With the elections coming, I suggest that the marketplace will be suffering and in need of another false promise / hope by the President.
At this time, I am bearish on the general market and the economy for the foreseeable future.
If you are in mutual funds or holding long securities positions, you are going to have a very hurtful summer and perhaps beyond.
Understand from the above General Market opinion that my Guidance for most all securities is also bearish. In my articles I include the following statement: "My analytic focus is investing wisely, e.g. taking advantage of the bull / bear cycles as they occur within the overall marketplace. Integrating conservative fundamental analytics within these technical cycles means maintaining a process of the thorough and on-going analytics of many companies, sectors and industry groups."
The Bigger Picture with Supporting Charts with CommentsMost Current Real S&P 500 Returns
The above chart provides an excellent long-term perspective of the S&P 500. I earned my first research dollar in 1957. I did very well through the late 1960s, just like the herd; it was a long-term bull market, and I didn't know it. I was just completing my doctorate and feeling very smart. I then did very poorly in the 1970s, staying even, just like the herd; it was a long-term bear market, and I didn't know it. Guess what, with all that education, reading over 400 books in the market that 13.5 year bear market still did a job on me. During that time, I wrote my Methodology and have had excellent performance since. I simple stopped listening to the herd of people and their advice and focused on doing it my way.
I lived those days with manual charting and a very slow feed of data. I believe those days taught me more than the last ten years of being immersed in the "information age."
The marketplace will soon break down again with another declining top bearish cycle. That should be clear to everyone.Corporate Profits Chart
The above chart is correct, with the red line addition. I never put objective prices or time frames in on my forecasts, do not believe exactly what you see. PC apparently agrees with my analytics, that Corporate Profits and hence earnings will be on the decline for some time to come.
I would like to thank PC - Pragmatic Capitalism for their fine work and supporting charts and data.The General Market On the Shorter-Term Horizon
Since late May, the S&P 500 has retraced over two months of the April / May pull back. I called this pull back on the button. I had expected a greater initial drop before the turn-up four weeks ago. We have had a brief pause but . . .
Mid-Session on last Thursday produced a bullish reversal that I believe will continue for a short time. These coming few days and into next week should produce more upside and a possible termination of this May / June rally.
The internals (Breadth) of the marketplace is and has been in severe peril since early February. Clearly a resumption of the downside is forth coming. I have been bearish based on the (Breadth) since early this year. Perhaps you have breadth Indicators to confirm that the internal market has already been hurt badly. Perhaps the best support for these remarks is for you to look at your last several months of your mutual fund holdings. If you don't own mutual funds (congratulations) and you own small or mid cap companies you have felt the pain and therefore should know what is going on.
My S&P 500 Company Valuations are clearly in the minus 20+ percent ( - 20+% ) range for the foreseeable future. That is a minimum valuation calculation from peak to trough. I believe putting target figures and dates in play for you to consider -- is just plain "foolish." Many do, many try and many are nearly always wrong! Don't be lead by this data, just listen to the marketplace and you will always profit.
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Steven H. Bauer, Ph.D.