Thursday, September 8, 2011

The Confirming Indicators Who Cried, "Bear!"

Many folks are wondering if the market action of the last few months is simply a correction in an ongoing bull market, or a brand new bear market.  

Here's a snapshot of some of the confirming indicators I use periodically.  If you've looked at my long-term Elliott chart (if you haven't seen the chart, it's the link to the right titled "The Big Picture"), you already know that I believe this is not only a new bear market, but that it will likely be worse than 2008.  If I were writing an advertisement for this bear market, I might say:  "It's a New and Improved Bear Market!  Now with more bear!"  (As a totally unrelated sidenote: I've always wondered about the common advertising expression "New and Improved!"  If it's truly NEW, how can it be improved already?  It's new.  If it's been "improved," it's not new; it's refurbished.  Something can be "Old and Improved!" but I suppose that lacks the same pizzaz.  Anyway...)

So, what are these indicators telling us?  For the past 12 years, each of these indicators has stayed within a pretty well-defined range during each prior bull and bear run.  All three of them have recently jumped back into bear territory.  Not only that, but they have done so with authority; much more violently than they have at the beginning of the past two bear markets.  This may argue that this is going to be the worst bear of the three.

I've also included a couple quick charts as an addendum.  The first one shows the hyper-volatility in the recent market action.  Scanning back the past couple years, the last time we find this type of volatility was right after the last big trend change, which is what the second chart shows.  Does it prove anything?  I have no idea, but I found them interesting nonetheless.

So without further ado, here are the charts:


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