Thursday, March 26, 2009

Is This a Bull Market?

As far as I am concerned, a bull market is a trend that carries the averages up at least 60% from their lows and that lasts at least 18 months. Janet has asked if I think this is a bull market.

Yes, I do. But I remind you that I completely missed the panic of 2008. And I thought in my 2009 stock market forecast that a new bull market started from the November low in the s&P at 742.

That said, I offer the following observations. First, at the March 6 low of 666 the S&P had dropped 58% from its 2007 high. Adjusted for inflation, the drop from the year 2000 high amounted to about 66%. These are BIG numbers. Unless you expect a replay of 1929-32, and I do not, then no bear market during the past 100 years in the U.S. has been as deep.

At the March 6 low I can only describe public sentiment and professional sentiment as depressed and hopeless. I base this assessment on 40 years of observing the investment scene closely and systematically. Of course, things can always get worse - and people who have believed that they will have been right over the past 12 months.

But the situation is so extreme that I think that even a return to just mild pessimism would be enough to produce a bull market in the averages. A 65% move up from the March low would put the S&P at the 1100 level, not all that far away.

So I think we are seeing the first stage of a new bull market. I think it will be a reluctant bull. I foresee it developing along the lines I described in my 2009 forecast. I shall have more to say on this subject in another post.


Anonymous said...

Thanks for sharing your time Carl.

Anonymous said...

Carl I must tell you that your blog is absolutely fantastic! I do not trade but I enjoy reading the blog daily and have learned so much from you over the course of the past year. Thanks for sharing all your ideas. All the Best

Anonymous said...

It feels to me the 'boomers' will have their 'recovery' a la government sponsored price stimulation and a heavy dose of media driven optimism.

Given such a scenario, the up move would last only a few months. Perhaps 1150 by late June. It will be the last hoorah for the generation that gave us the 60's and few in the world will be sorry to see them go down with what will be left of value in the old USA.

Anonymous said...


1,100 IS farway!

Also, what do you make of the social situation in the USA? Massive lay-offs and massive personal debt do not make for a comforting economic outlook. The household debt levels as a % of GDP are way above what we had in 1929. How can this go on further without any correction in the habits of the US populace?

Anonymous said...

Sorry Carl, I do expect a replay of 1929-1932. I don't think a new bull market will start until stocks become cheap, and they are certainly not cheap now.