44 replies to this topic

[IYB]

Don, I too was around in 1974 and my memory of the end of the 1974 bear market was much different than yours so I looked it up and found this informative link with a chart and then scrolling down some commentary on the bottom.

http://www.fiendbear.com/bear1973.htm

Thanks for the chart Gary. I didn't have one last night but was working purely from memory of 35 years ago. As I look at your chart, I see that I had it precisely right except for the size of the initial spike off of the Aug 1974 DJ570 low- Indeed that spike was just under 20% (not 40-50%)....but the important and relevant fact remains that it was followed by a full blown retest of the August lows in December and then finally the market turned up off this base in January 1975 and broke through the 200 day MA, which in turn turned up shortly thereafter. Thanks again. D

[Cirrus]

Don, The point I was attempting to make is using the 13 month with positive slope (or, even the 200d as you just mentioned) would have caused one to miss over half the bull run! In the case of the 13 months you would have missed more than the 200d, obviously. That's why I posted. Again, in many major market turns the 50wema type strategy (or 200d/13 month) works but not all. It's important to consider the market dynamics or what's behind things instead of just a "black box" technique like always waiting for said MA to turn. Here we have a nasty bear that brought the averages so far below these MA's that using that type of strategy would be unwise. That's why I complemented you on the value of something like the 7 Sentinels for IT trading....I'm calling this a bull rally in a bear market...like you....because I too use the 50wkema and its slope. However, I think there's more than a chance that using this as a context of this rally could be wrong in this case due to the dynamics of the bear that preceeded this rally.

[SemiBizz]

OK, so I am going to ignore the bull or bear market discussion here... Let's just look at TRENDS. Strong Trends... 1. Hold Gaps. 2. Move in Direction of Trend regardless of volume.

[IYB]

Don,

The point I was attempting to make is using the 13 month with positive slope (or, even the 200d as you just mentioned) would have caused one to miss over half the bull run! In the case of the 13 months you would have missed more than the 200d, obviously.

That's why I posted. Again, in many major market turns the 50wema type strategy (or 200d/13 month) works but not all. It's important to consider the market dynamics or what's behind things instead of just a "black box" technique like always waiting for said MA to turn. Here we have a nasty bear that brought the averages so far below these MA's that using that type of strategy would be unwise.

That's why I complemented you on the value of something like the 7 Sentinels for IT trading....I'm calling this a bull rally in a bear market...like you....because I too use the 50wkema and its slope. However, I think there's more than a chance that using this as a context of this rally could be wrong in this case due to the dynamics of the bear that preceeded this rally.

Points well taken Cirrus. I am not actually advocating that trading accounts stay out of the long side during IT advances in a bear market---as you know the current IT advance has made me a lot of money....but am only trying to respond to the title line of this string. My simple point is that by any reasonable definition, I for one, could never, ever call the current climate a Bull Market. And to blindly get long or stay long now with a buy and hold mentality on hopes that this is a bull market, to me is insanity. Anyhow, I appreciate the exchange.....Regards, D

[Cirrus]

Agree with you about what to 'call' the market. That doesn't change the fact that it may be a bull market. By some measures the current rally is quite a bull market (20+ % move in major indexes). I am not 'calling' this a bull market yet by my own measures. I am open to the fact that it might be a bull market, though. I look at other contexts beside technicals. It's been my opinion for the past several years that the true driving force behind every move in just about every tradeable instrument is available liquidity (dollars) and the willingness of those holders of said liquidity to 'spend' it buying up whatever instrument they choose. My big tell for a coming rally was valuation in context along with the fact that there was nearly 50% of the US market cap in ST money market funds earning sub 1%. The low in 2002/03 was 38%. Thus, you had plenty of gas puddled around and all we needed was a spark. There is still plenty of liquidity out there and being created. It's just a matter of using TA to determine where it has been going, where it's going now and 'guess' at where it will be going. If it keeps going into bonds there's not much to 'trade' unless you trade bonds. If that cash decide to flow out of that massive soveriegn bond pull while the Fed keeps the pool full we have recipe for bullish insanity. I have the highest regards for your work and realize that you would never blindly buy and hold this rally in the context of assuming it is a bull market. I was just responding with the dangers of relying ENTIRELY on a 13 month or whatever MA and it's slope for a tool to determine one's market stance and capital allocation.

Edited by Cirrus, 20 May 2009 - 12:20 PM.