Thursday, March 6, 2008

Thoughts on the Markets: Bear Markets

A 'retest' of these lows was very much on the agenda the whole time. The bulls need to hope that the FED does NOT intervene soon. They need this flush out, they need the panic that would be created if the lows are taken out in dramatic fashion. Need to see the lows break with a 500-700 pts loss on the DOW in a week or less. Gotta scare the BA-JESUS outta folks. Bear markets end with a very very dramatic market shock events. It could happen next week or in 4 weeks or in six months i don't know when it will happen but that's what 'needs' to happen!

The Chart below depicts the last stages of the 2000-2002 bear market and shows how dramatic the retest was. I was trading during this time and i recall every step and how dramatic and violent the moves were and to think that the DOW was 3000 pts lower back then. It gives me goose bumps just posting the chart. Bear market are so violent and merciless and always end in very very dramatic fashion with VIX spikes in the 30s and 40s. How do you like that for dramatic???!!! This bear market is no different in my mind.



Blue said...

I didn't have control over my own portfolio back then as it was being managed by some lasy ass do nothing over at Merrill Lynch, but I can tell you this... Even though the DOW is up 3,000 pts from where it was just a few years ago I still have stocks I'm holding in losses that will never recover back to those 2000-2001 highs (when they were purchased). Just dead money all these years except for the dividend.

That's why I'm almost 90% cash right now except for those long term losers. I understand the value of holding stock and that long term the market appreciates, but right now, I refuse to be a bag holder. My cash account is making more than your average savings account and at least that cash isn't turning into a depreciating asset (forget about inflation for argument sake). Can I get an amen?

If I could chose a superpower I would like to be a Clairvoyant Trader. Man I'd like to know how low and how fast this market is going to drop and how quick will it recover.

Thank God I went to a margin account in January.

Woodshedder said...

Nice chart.

I agree that bear markets end violently.

Corrections, however, can sometimes end with a whimper.

As I believe we are in a bear, I'm looking, like you, for a capitulation bottom.

I think the MACD may be the best indicator for sniffing out bottoms. There is almost always a positive divergence in the MACD when the bottom is put in.

Market Monk said...

Enjoy? You end your post with Enjoy after you give me a hint of what's to come resulting in scaring the living BA-Jesus out of me? LOL.

Great post!

Bluedog said...

Wow, what a violent chart! We'll see what tomorrow's jobs report brings. Thank god I'm off margin. ;)

Stewie said...

MM> 'Enjoy' is the trader in me talking. I love this shit dude. I am so passionate about awesome trading opps. I don;t want people to lose money but i want people to learn how NOT to lose money and you gotta study the past to know that. i know you at least 'enjoyed' and hopefully others. peace.

Market Monk said...

Stewie, I know why you said enjoy but I had to try to give you a hard time because for those who are not traders and don't short, that would be a strange ending statement.

It is my opinion that we could go into a long range bound period. I could be completely nutso and we end up having a normal bear then bull cycle or two. But my gut tells me that I need to learn how to "trade" and that I also need to learn how to "short" stocks/ETFs in order to not be dependent on only "bull" markets.


Market Monk said...

Blue, could you explain your last statment about how you are glad you went to a "margin" account?


Johnson's Blog said...

What I remember most about the 02 lows was the violence with which we bounced in July - the majority of my favorite long termers bounced then and never looked back - Oct and March "bottomed" in these stocks at much higher levels. There is HUGE money to be made getting in at the end of a bear and beginning of a new bull. Go long and just hold baby!

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