AreWeInABearMarket?

Thequestionsthatour=>
MEMBERSHERE
,keepaskingusis'areweinabearmarket'
orAreweinanearlystagebearmarketoralatestagebullmarket?

ThisseemstobeacomplicatedsubjectIguess,andwhilenooneisanaccuratesubject
wedohaveafewchartsthatseemtobegivingusahugeadvantageintryingtoanswer
thistrickytopic.

Abearmarketinstocksgenerallyundergoesthreestages.

Source:MarketWatch

STAGE1:

Thefirstisconfusion:Themarketstalls,anditsdirectionswaysbackandforthas
investorsaredividedastowhetheritisacorrectionamidanongoingbullmarketorthe
beginningofanewbearmarket.

STAGE2:

Inthemiddlestage,themarketfallssteadilyandorderlyasinvestorsacknowledgeitisa
newbearmarket.


STAGE3:

Inthefinalstage,themarketdeclineacceleratesasinvestorscapitulate.

Wedonotthinkthattodaysmarketlooksliketheearlystageofanewbearmarket,
althoughtheeconomicbackdropdoesntseemlikeitwouldsupportasevereorlengthy
one.EventhoughtheS&P500Indexhitanalltimehighof2,134.72asrecentlyasMay
20,itmostlyhasbeenstuckinanarrowrange(between2,0502,100)sinceDecember.

Themostimportantchartheredoesnotreallyseemtosuggestweareinthestartofa
BEARmarketatall.Ofcoursewecanbewrong,butnormallywhenyouseethestartofa
BEARMARKET,youdonotseesuchVIOLENTandQUICKrecoveries!Seethechart
below.YoucanseewehadaHUGEselloffof300points,from2100ontheS&Pright
backdowntonearly1800,andthenaswiftandquickrallybackuptotheoldHIGHS!

areweinabearmarketlargeselloffhas
recovered!

Icanhearthecriesonthestreetrightnow,bymanyanalystssayingthattheHUGEdip
wesawinAUGUSTontheCHINAnewsisthestartofabearmarket,andweare
experiencingadeadcatbouncebeforeaHUGEcrashthatwillcomein2016.

Iguessthatisjustaguess,becauserightnow,whenyousitbackandtakealookat
thingsintelligentlythatselloffinAUGUSTmighthavejustbeenanextremelygood
opportunityforbullswaitingfortheirDIPtogetbackintothemarket,andmakeofflike
bandits.Imean,ifyoudidtakethatsortofaction,youwouldbesittingbackinthepool
sippingonyourmartinismiling,whileothersoutthereareperplexedandconfusedto
exactlywhatisgoingon?

Justquietly,thechartswearelookingatnow,seemtosuggest,thatthebullmarketthat
startedbackin2009,isnotdonejustyet,sodonotholdyourbreadth.Just2months
ago,manypeoplewerecallingTOPSandDROPSandsayingthisTHE"EFFING"ENDOF
THEWORLDCOMING!.....LOL

Thenyoufastforwardseveralweeks,andtheS&Pisbackupattheoldhighsof2014.
Thatwasonehellofarally,wejustsawifyoudon'tmindmesaying!.Ofcoursethe
markethasdieddownalittle,butitseemslikeitswaytoearlytowriteoffthebullsjust
yet.

TherecentmarketroutpushedtheS&P500downtoaslowas1,867.01onAug.24,a
12.5%drawdownthatexceedsthe10%thresholdgenerallyregardedasacorrection.This
isthefirstmarketcorrectionsince2011,whichoccurredduringtheU.S.debtceiling
crisis.Themarkethasrecoveredsomewhat,andbasedontheclosingpriceSept.15,the
S&P500needstofallanother13%toreachthe20%drawdownthresholdgenerally
consideredtobeabearmarket.Althoughwearelessthanhalfwaythere,the
correctionversusbearmarketdebatehasheatedup.Soarewealreadyintheearlystage
ofabearmarket?

Itsonlyinhindsight,whenwelookatthedata,thatweknowforsuretheexactmoment
whenabearmarketbegan.Pastrecessionshavebeenblamedonavarietyofreasons,
fromInternetinvestorsgoingcrazyduringthedotcombubbletoacomplacentFederal
ReserveaheadoftheGreatRecession.Butasanyonewhohasexperiencedthese
periodscanattest,noonereallyknowsforsurewhenrecessionsbegin,noteventhe
almightyFed.Itismybeliefthatitalsoisimportantnottogethunguponnumberslike
10%foracorrectionand20%forabearmarket.Investingisnotanexactscience,and
thesenumbersserveonlyasguidelines,unlikethetemperatureatwhichwaterfreezes.
Andwhetheramarketislabeledcorrectionorbearmaynotconcerninvestors:a
19.5%dropisjustasuglyasa20%drop.

Hereistheupshottothat.IftheS&P500indeeddipsbelowthe20%drawdownpointdue
tomarketvolatility,andthusentersintobearterritory,itmightbetheperfecttimetobuy.

Unlikerecentmarketdownturns,whichwereshallowandshort,thisdeclineindeedfeels
different.WecanblameGreece,ChinaoreventheFed,butIfeelthefundamentalreason
forthisdownturnisthatthestockmarkethadbecomeexpensiveaftermorethana

sixyear,nearnonstopadvance,inwhichitsvaluehadmorethantripled.WiththeFeds
interestrateliftoffapproaching,itishardforinvestorstojustifypayingupforrisk
assets(anyassetthatcarriesadegreeofrisk).Duringpreviousmarketselloffs,
includingthescary2011U.S.sovereigndebtcrisis,investorstookadvantageofthose
downturnstoscoopupstocksbecausetheywerestillcheapandthusworththerisk.
Thatmaynotbetrueanymoretodayspricetoearningsmultiple,basedon$118for2015
earnings,isstillahefty16.7.

Therearetwowaysforstockstobecomecheapagain:Pricesmustfallorcorporate
earningsmustrise,assumingstockvaluationsareunchanged.Withallthevolatilityand
anxietycausedbytherecentmarketrout,stockpricesnoware7%cheaperthanattheir
peak,areliefforastockmarketinwhichthefundamentalissuewasrichvaluations.With
2016consensusearningsprojectedat$130pershareforS&P500companies,theS&P
500forwardpricetoearningsratiois14.8verymuchinlinewiththelongtermaverage
of15.Ifthestockmarketreallyentersbearterritory(belowthe20%drawdownpointof
1,707.87),andearningsprojectionshold,thentheS&P500willtradebelow13.2times
2016projectedearnings,onceagainbecomingabargain.

Thecurrentdatasuggestthatthe2015stockmarketismuchdifferentfromthe20072008
GreatRecessionandthe2000dotcombubble(theprevioustwobearmarkets).In2008,
thereweresystemicrisksintheentirefinancialsystemin2015,economicfundamentals
aremuchhealthier.In2000,stockvaluationsreachedabsurd,stratosphericlevelsin
2015,stocks(eventhoughexpensive),arestillwithinsensibleterritory.Thecurrent
economicenvironmentandstockvaluationssimplydonotportendafullblownbear
market.

TheupshotisthatiftheS&P500indeeddipsbelowthe20%drawdownpointdueto
marketvolatility,andofcoursethatCOULDhappen.Thatwouldprobablyenterusinto
bearterritory,itmightbetheperfecttimetobuy.Withafullblownbearmarketaremote
possibility,therewillbelittleimpetusforthestockmarkettokeepdecliningaftera20%
fall,asitalreadywillbearelativebargain.Lotsofpeopleareconfused,butperhapsthis
clearsthingsupabitforyou?

NoneofthisrulesouttheeffectsofarateincreasebytheFedorfurthererosionof
Chinasgrossdomesticproduct.Imeanthatcouldhappentoo.Wheninvestorsget
spooked,itcanbedifficulttopredicttheirbehavior.Butoncethedustsettles,prudent
investorswilllookatmarketfundamentalsandtakeadvantageofrelativebuying
opportunities.Solidearningsandreasonablepricemultipleshavebeenstalwartsfor
investorsinpastcycles.Thereisnogoodreasontoassumetheywontagainserveto
keepthebearinhiscave.

Itjustseemsthattheexacttimethemarketsuffersadrop,andthebearsdocomeoutof
theircaveandprophecyTHISISTHEENDOFTHEWORLD,andSCREAMfromthe

rooftopsaboutaMARKETCRASHfortheages,ifyoulookbackoverthelast7years,
whentheygothighlynegative,andpredictingbadthings,itwasaperfecttimetoBUYor
GETBACKinthestockmarket!!!!!Ifyoutookthiscourseofaction,youwillbeinserious
profitssofar.Justsaying!

Sointotal,IwouldsaythatweareNOTinBEARMARKET,orinthebeginningstagesof
aBEARMARKET.Butitcouldcomesoon,andweareevenopentothatidea.Butfor
now,wemustfollowandwatchthechartscarefullyasthevolatilityincreasesinthe
globalmarketenvironments.

Inconclusion,wecouldberightintheBeginningofnewresetbull...Iguessthereare
severalpointsabovethatnowbasicallytellusthatweareINFACTNOTINABEAR
MARKET!Thatwouldbeourprediction,butwemightbecomingtothelatterstagesofa
bullmarket.Imeanourmembershasdoneridiculouslywellsince2009,atatimewhen
everyoneelsewasscreamingthemarketwasabouttocrash,ourindicatorsbackthen,
saidaMULTIYEARbullmarketwasontheway.Hereweareyearslater,andthatturned
outtobeverytrue.

NowweareinamarketenvironmentwherelotsofBULLSandBEARSaretotally
confusedandIcantellyouthatitscreatingHUGEPANIC,butnotonlythat,itsalso
creatingHUGEOPPORTUNITIESgoingintoXMAS.Mostpeopleforget,whenother
peopleseePANIC,andVOLATILITY,smartpeopleseeBARGAINSandOPPORTUNITIES
fortheplucking.Asatrader,timingiseverything,andrightnowwearecomingintoa
timewheresomeonewhoknowswhattheyaredoing,canmakethenext12monthsvery
profitable

Icovermoreandmoretechnicalanalysis==>

HEREinourVIPmemberssection
.

YoucancheckoutourBLOGHere:
http://sentimenttrader.blogspot.com

SENTIMENTTRADER