19 June 2009
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Here is the BEV chart for the Bear Race.
If this Bull could charge upwards to glory, without any "injections" from Dr Bernanke, I'd be all for it. But he's not doing that. Look at what he is doing! He's sneaking back to the BEV -40% line, and taking his sweet time doing so. In my book, that means this Bull is going the wrong way! What's up? I think it's the green shoots thing. Who knows what goes on in the mind of this ignorant beast, but it wasn't that long ago when he was actually below the BEV -40% line. Maybe he remembers the shoots on that side of BEV -40% being tastier.
Early last March, everything started out so promising. Snorting fire and brimstone, the bull climbed up from out of the second worst DJIA Bear Market bottom since the Dow Jones recorded their first market average in 1885. Most people were in shock and missed the move. By the time confidence returned to the market, and people felt comfortable coming back into their stocks, this "Bull" started munching on those damn green shoots and laying down more than is good for the financial health of investors.
I'm telling you right now: people don't want no stinking dividend payments. They remember the 1990s in stocks and the housing market during the early 2000s. People want "liquidity driven" double digit capital gains and they want them without any feelings of risk or uncertainty. You know, just like it used to be. Don't think investors haven't been patient.
It has been almost 10 years since Greenspan "injected liquidity" into the DJIA and made it climb like a jet plane. And then he let everyone down with a horrible -37% DJIA Bear in 2002. They forgave the "Maestro" when he brought back the stock market * plus * a Bull Market in Real Estate from 2003 to 2006. What a genius! But bone-head Bernanke screwed everything up in 2007. Now after the second worst DJIA Bear Market since 1885, this stupid Bull is about to cross the BEV -40% line, again!
There is no panic. Why should there be panic? Just because the Baby Boomer hair is going grey with age, and their best years for generating wealth are over, and so what if Social Security is a Ponzi Scheme? Is it really such a big deal if the Obama Administration has ceased control of the banking and auto manufacturing industries with the goal of Sovietizing them? What's the problem if the Congress plans spending a few measly trillion dollars so everyone can have free health care? Investors don't care about any of that stuff as long as that damn Bull keeps heading up.
But somewhere on the BEV Scale in the above chart, a demon lies in wait for the Bull. I don't know where it is, but I find it hard to believe that if the DJIA goes down below the BEV -50% line (again) a panic could be adverted. It will be as if someone tossed a light switch to the on position. On that day, people will notice every grey hair they have, (or in my case lost); Social Security will only be discussed as a Ponzi scheme. Boilers in GM and Chrysler plants whose fires burned for decades will become "cold iron". Tumble weeds will blow down Wall Street. The politicians will find someone to blame, Oil Sheiks, Gold Bugs, those sorts of people.
Only one thing can stop this from happening: get that damn Bull moving back up again! Can he do it?
Not when going down is easier than up; and the Step Sum (2 Charts Down) is heading down again, meaning more days down than up.
After a horrible year of extreme volatility, when conditions favorable for a bull market are present, and we see a beautiful "V" bottom in the DJIA, it's really pathetic seeing this Bull showing signs of exhaustion only three months later. Look at the above chart, the market just rolled over last August. To my eyes, a similar pattern is forming a year later in June 2009.
Are we going to have a crash? Not if Washington has anything to say about it! But that is not a comforting thought. It means that if we do have a crash, there will be nothing to soften the blows.
If I sound especially bearish this week, please excuse me. But I have these feelings of dread you must deal with if you read my work. Washington is totally out of control. Their past obligations are woefully unfunded as they set off on new hare-brained schemes to save the world. They are spoiled children using other people's credit cards to finance their fantasies and impress their friends. At some point, it's going to impact the DJIA and Gold & Silver. The chart below provides me with a good night's sleep. You would do well looking at it long and hard.
Below is my 8-Count & DJIA BEV Chart
Currently the 8-Count is 1. I expect it to be back to Zero next week. This market is going down on low volatility. If this market can't go up on low volatility, what do you thing will happen when volatility picks up again?
The 200 Day M/A is steady as a rock, but the 40 Day M/A is dropping fast.
Sometimes the DJIA and its Step Sum closely follow each other. And there are other times they diverge. I've shown the Great Depression DJIA and its Step Sum in the past as an example. I call this divergence a Lundeen Bear or Bull Box.
Currently the DJIA is not following the Step Sum, and it's not diverging. When this Bull isn't snoozing, it's happy to waddle back to the BEV -40% Line like a dumb cow. We will just have to wait and see what it does after it wakes up from its nap.
The Step Sum is an indicator of market sentiment. When the underlying sentiment is bullish, the Step Sum will rise. When bearish, it falls.
Think of the "Step Sum" as the sum total of all the up and down price "steps" in a data series over time; an Advance - Decline Line for a data series derived from the data series itself. Logically, bull markets will have more net up days, while bear markets will have more net down days. Understanding the Step Sum is no harder than that.
I'm taking a vacation, sort of.
I've followed markets since 1977 when I first joined the Navy. Most people go to college and then into the investment industry before they start writing market commentary. Myself? I went to sea. But we all have passions, and I discovered my love of markets in San Diego at the 32nd Street Naval Station's base library reading Barron's and other fine financial publications in my off hours.
I found reading these publications informative but frustrating. I knew absolutely nothing about markets thirty two years ago. Some expert would discuss how this, that, or the other thing was going up or down was good for this but bad for that. I was impressed! But it's hard to follow indicators without actually having the data. Computers changed everything!
When I finally purchased a laptop computer with a hard drive in 1991, a fellow Chief on the Decommissioning crew of the USS Midway, who lived as boring life as I did in the Navy, went with me to the San Diego City Library to enter data from old Barron's publications. That "Old Goat" (as Chiefs are known in the Navy) and I are still friends. The Market bug bites strange people in unexpected places.
I had a bit of luck in the markets when I got out of the Navy. I don't live extravagantly mind you, but I'm comfortably independent. My situation afforded me the opportunity to compile more data from old issues of Barron's. I must have passed through each issue at least 5 times. What a wonderful education. This is especially so if one goes backwards in time entering data. As people from decades ago would make predictions, I knew the results before the predictions were made!
It's the world's loss that Barron's doesn't occasionally republish, in full, some of those brilliant articles from the 1920s up to the 1990s, with comments on how those old the market situations were finally resolved. They probably think there is a lack of interest. From reader response of my work using Barron's old data and the insights from those ancient pages I've used in my writings, I think they're wrong. Historical perspective is always interesting to people who truly love markets, especially when things go wrong and we can learn from mistakes others made decades ago.
Anyways that's who I am. Just a retired "Old Goat" with a hard drive full of Barron's statistical data who is sharing his personal research with others on the internet thanks to Bill Murphy of Le Metropole Café (I'm a subscriber) and Mr Vronsky of Gold Eagle. Both of these gentlemen have been very kind and patient with my horrible grammar over the years. Some of my early stuff was really bad, but I'm improving!
My grammar aside, I know I offer something unique in financial commentary. Detailed decade-long charts not found anywhere else. I've also committed myself to construct my graphics first before I wrote my commentary. As someone whose path to financial commentary was far from the usual route, my insights have frequently been unique. I've also addressed many topics, with supporting data that have not been discussed in decades. The Social Security connection to the tax deferred investment accounts, the DJIA Dividend Rule, measuring US economic output via a BEV Chart of the Electrical Power Grid's load, and other topics. My stumbling upon the significance of the DJIA falling 40% from its previous high as a solid buy signal, except the one time in 1929, and maybe for the 2007-09 Bear, is something I claim for myself.
I intend to continue to publish my weekly comments on the BEV
Chart, Step Sum and maybe some other items, so I'm not totally going away. But since last October, I've spent over 20 hours a week researching, preparing graphics, writing, and re-writing my reports. I'm really not a man of letters, but I'm pleased with my work. I never thought I had it in me! I'll write detailed focus topics again as I have in the past, but I just want to take a little break until October. I want to read some history books and delved deeper into market topics I find interesting and watch some TV in the next few months.
Until then, thanks for the nice letters everyone wrote. I expect to be back up to speed by October.
19 June 2009
Dow Jones -40% Declines From 1885 to 2008 is the article that inspired this race of 1929 & 2007 Bear Markets. You may want to read that article to understand my "BEV Chart."
Dow Jones Industrials Average Market Volatility is the source for my volatility studies.
The Lundeen Bear Box and Step Sum is the source for my Lundeen Bear Box and Step Sum Chart
Note For the Record: Mark Lundeen does not want a devastating bear market in the next two years. However, in full view of Congressional Market Oversight Committees and under the supervision of Government Regulatory Agencies, things were done that I believe will make a historic bear market inevitable. If you have a problem with this bear market, contact Washington, not Mark Lundeen.
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