Bear View II - Writing on The Wall
Jon Markman at MSN thinks a 25% market decline is very likely.
We have echoed the same sentiments in these pages and agree that the handwriting on the wall is very clear.
Key Quotes: I noted that the present reminds me a lot of the autumn of 2000, when the market peaked amid fantastic earnings reports.
I think that right now is a good time to remember that while most of us like to think of ourselves as optimists and long-term investors, there come times when our enthusiasm becomes a little bit disconnected from reality.
You can see that the dollar is falling, energy prices are soaring, home prices are stalling, the U.S. budget deficit is out of control, the Administration and Congress are flailing and inflation is on the advance. And you can conclude from all of these concerns that the market should fail.
To be totally blunt, I think there is real potential for a 10% to 25% decline over the next six months -- with the harsher end of the spectrum the more likely. As much as I wish that weren't the case, it seems unavoidable.
What's worse, a lot of the stocks that smaller investors are the most heavily invested in -- the small-caps and mid-caps -- could get hurt even worse.
If you look at the individual stocks in the DJIA rather than the index itself, the top was made in July last year -- not earlier this month. Only 7% of the Dow stocks were making new highs with the Dow in May.
Recent tape action has given the view some urgency. (There have been some "90% downside days," ) or days in which 90% of stocks go down, and 90% of the volume is down. When these occur near market highs they tend to signal the beginning of a long slide. More to come in Part III
We have echoed the same sentiments in these pages and agree that the handwriting on the wall is very clear.
Key Quotes: I noted that the present reminds me a lot of the autumn of 2000, when the market peaked amid fantastic earnings reports.
I think that right now is a good time to remember that while most of us like to think of ourselves as optimists and long-term investors, there come times when our enthusiasm becomes a little bit disconnected from reality.
You can see that the dollar is falling, energy prices are soaring, home prices are stalling, the U.S. budget deficit is out of control, the Administration and Congress are flailing and inflation is on the advance. And you can conclude from all of these concerns that the market should fail.
To be totally blunt, I think there is real potential for a 10% to 25% decline over the next six months -- with the harsher end of the spectrum the more likely. As much as I wish that weren't the case, it seems unavoidable.
What's worse, a lot of the stocks that smaller investors are the most heavily invested in -- the small-caps and mid-caps -- could get hurt even worse.
If you look at the individual stocks in the DJIA rather than the index itself, the top was made in July last year -- not earlier this month. Only 7% of the Dow stocks were making new highs with the Dow in May.
Recent tape action has given the view some urgency. (There have been some "90% downside days," ) or days in which 90% of stocks go down, and 90% of the volume is down. When these occur near market highs they tend to signal the beginning of a long slide. More to come in Part III
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