A big 5%+ down day is way overdue
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We are still in the denial phase of this down move.
Looking at SPY, in the last bear market it lost 50% of it's value. Currently it's off 10%.
If this is indeed the beginning of a bear market then there may be a long way to go.
One of Dennis Gartman's items on his checklist is this:
There Is Never Just One Cockroach: The lesson of bad news on most stocks is that more shall follow... usually hard upon and always with detrimental effect upon price, until such time as panic prevails and the weakest hands finally exit their positions.
GC
Looking at SPY, in the last bear market it lost 50% of it's value. Currently it's off 10%.
If this is indeed the beginning of a bear market then there may be a long way to go.
One of Dennis Gartman's items on his checklist is this:
There Is Never Just One Cockroach: The lesson of bad news on most stocks is that more shall follow... usually hard upon and always with detrimental effect upon price, until such time as panic prevails and the weakest hands finally exit their positions.
GC
A few things: the rise in volatility and denial by hedge funds like GS's GEO, AQM, DE Shaw, Simons fund, etc...
A rise in volatility after long periods of low volatility usually signal a market turn, and as you state, the monthly charts are still in an uptrend, but by the time you recognize that its turned into a downtrend, you've missed maybe half the down move.
About the funds. There is still a ton of hubris out there, ala LTCM, that markets are not fairly valued and that this is just a blip in the radar. You don't have people liquidating stocks en masse, most are holding and hoping for a V bottom and a quick return for the bull. So you have weak holders who are still holding. A ton of these hedge funds are weak holders. When they start pushing the sell button, it will be a cascade down. We haven't seen nothing yet.
A rise in volatility after long periods of low volatility usually signal a market turn, and as you state, the monthly charts are still in an uptrend, but by the time you recognize that its turned into a downtrend, you've missed maybe half the down move.
About the funds. There is still a ton of hubris out there, ala LTCM, that markets are not fairly valued and that this is just a blip in the radar. You don't have people liquidating stocks en masse, most are holding and hoping for a V bottom and a quick return for the bull. So you have weak holders who are still holding. A ton of these hedge funds are weak holders. When they start pushing the sell button, it will be a cascade down. We haven't seen nothing yet.
This is false - see VIX from 1996 to 1999 and compare to SPX.
As for the rest of you post, that is just your opinion on how things will play out - were you trading in 98? The fear then was very similar to now and many made similar arguments - hedge funds blowing up etc. A major bear market did not result.
Did you read my above post? I was invested in 98 and the fear is different.
Back then, people were really really scared and the market prices reflected, that. Do you remember Aug 31, 1998? It seemed like no one wanted to hold anything that day. That is fear, not what is happening now.
People are concerned, but not scared. A big difference. Also back then, the bottom occurred only after the Nasdaq went from over 2000 to 1400, or a 30% downturn. What's the downturn now, about 10%? You calling bottom already? GLTY.
Historical valuations for stocks on a P/E basis. The P/E on the S&P 500 is around 17, even after all this selling the past few weeks. The historical market P/E median has been around 15.
It is overvalued compared to commodities IMO. As for real estate, that is also overvalued but not by as much as people think.
Ah very interesting, so basically stocks have been overvalued for the last five years and we should have been in a bear market according to your analysis from 2002 till 2007:
PE by itself means nothing, you always have to see it in context with bond yields and inflation. That's why I asked "overvalued to what". Are 10y Treasuries "cheaper" than the SP500?
<i>"Explain why it won't be like 98 and will instead be a long bear market."</i>
Wrong request. Explain why this time will be the same as 1998. Where is the quick fix = instant solution to rampant true inflation, debt-market drain, real estate drain, rising oil ahead of heating season and waning trust in the stock market?
You don't back out food and energy from your own budget, do you? I don't. That's what true inflation is versus the government b.s. voodoo math fed to their sheeple who don't stop and think about reality for two seconds.
What will fix the domino-effect of ARM resets and further subprime = alt A decay? A surprise rate cut? Two cuts? Bandaid on an arterial bleed.
What will fuel the M&A deals levered by pure debt? Where will that debt liquidity to underwrite more IPOs come from?
What will turn the housing market upward? Who will start buying all that back-logged housing inventory, where will the consumer capital come from?
What will send oil prices back below $60 per bbl when this year's heating season is longer and colder than last year's record warmth?
What will instill retail investor confidence in a stock market that wiped out seven months of annual gain in three weeks? There's been a giant sucking sound out of equities and into fixed instruments by Joe & Jane 401k. What will turn that on a dime by next month?
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This time is much like early 2000, not late 1998. The latter was a brief blip fueled by concentrated, easily solved crisis. The former was a deflation of multiple asset bubbles. So is this one.
It would be interesting to hear why this time will be like 1998.
Wrong request. Explain why this time will be the same as 1998. Where is the quick fix = instant solution to rampant true inflation, debt-market drain, real estate drain, rising oil ahead of heating season and waning trust in the stock market?
You don't back out food and energy from your own budget, do you? I don't. That's what true inflation is versus the government b.s. voodoo math fed to their sheeple who don't stop and think about reality for two seconds.
What will fix the domino-effect of ARM resets and further subprime = alt A decay? A surprise rate cut? Two cuts? Bandaid on an arterial bleed.
What will fuel the M&A deals levered by pure debt? Where will that debt liquidity to underwrite more IPOs come from?
What will turn the housing market upward? Who will start buying all that back-logged housing inventory, where will the consumer capital come from?
What will send oil prices back below $60 per bbl when this year's heating season is longer and colder than last year's record warmth?
What will instill retail investor confidence in a stock market that wiped out seven months of annual gain in three weeks? There's been a giant sucking sound out of equities and into fixed instruments by Joe & Jane 401k. What will turn that on a dime by next month?
*
This time is much like early 2000, not late 1998. The latter was a brief blip fueled by concentrated, easily solved crisis. The former was a deflation of multiple asset bubbles. So is this one.
It would be interesting to hear why this time will be like 1998.
Quote from makloda:
Ah very interesting, so basically stocks have been overvalued for the last five years and we should have been in a bear market according to your analysis from 2002 till 2007:
PE by itself means nothing, you always have to see it in context with bond yields and inflation. That's why I asked "overvalued to what". Are 10y Treasuries "cheaper" than the SP500?
If you believe the inflation numbers pumped out by the government, I got a bridge located in Brooklyn to sell you. Inflation is high, bond yields are low, bond yields will go higher from here. The dollar has been devaluing for years now, it will continue for several more years. When the dust clears, you will have international markets recovering much faster than the US markets.