Saturday, May 1, 2010

Bull, Bear, Secular, Cyclical... Jibber Jabber

Technically speaking... Tim Wood is a market technician who focuses on identification of long-term trends, trying to identify when they will change direction. It seems like an art to me, but he approaches it using a science called Dow Theory. He writes about his observations of trends and does a good job of explaining how he comes to his conclusions. He continues to hold that the stock market began a long-term bear market after reaching the current market high water mark in October of 2007. More technicians say that the secular bear market began with the inflation-adjusted high water mark, reached in 2000. Tim Wood has a description of the length of time he would expect a secular bear market to last, following the peak reached in 2000. He concludes it was scheduled to reach it's low point in 2009, like we saw in March in 2009. That would end the secular bear market, unless you are Tim Wood. When the secular bear market trend begins is important as he explains.
"Thus, if the 2009 low did not mark the secular bear market low, then the 2007 top had to have marked the secular bull market top. This then means that the March 2009 low should prove to be the Phase I low and that the rally we have seen since then should ultimately prove to separate Phase I from Phase II of the ongoing secular bear market. Based on this data along with the historical relationship between bull and bear markets, this also means that the last great bull market ran 33 years into the 2007 top. Thus, the bear market that follows should run some 11 years. At present, we are merely 2 ½ years into this bear market. If the traditional relationship between bull and bear markets of the past 113 years holds true, then an idealized bottom for this bear market is not due until approximately 2018."

I recommend reading his article and trying to be open to the approach he practices. Scanner