Some media, including Barron’s, CNN and market observation, it was suggested that 20%of the movement of the low-qualified as a new bull to the farm.
Not really? To find out, I reached out via email to many of the savvy technician and strategist in the streets of. Their insights are rich and thought-provoking.
Before we get to them,a fast the confession of my ex: we long-term think traditional measures of cattle dogs and a bear market is wrong. My preferred measures of a secular bull market field includes four factors:
–A wide range of economic expansionRising corporate income and profits;
–The rise of the stock price Make a new record for the highest;
–Improve the mood of investorsAnd are willing to pay more and more for each dollar of earnings;
–Duration:Lasting through a substantial length of time–years and decades.A
I will address these in more detail in a future post. At the same time, let’s see what the technical types who look at the price action and the history of words.
Start with the 20%definition: it seems to be uniform not like everyone. Ed classes, chief United States strategist at the highly regarded art store Ned Davis Research(NDR)noted that the company never liked the 20% rule:”after 20 years ago, we created our own standard, because the 20% rule created a couple of cattle dogs and a bear market during volatile times, most wouldn’t consider a cow or a bear. Many occurred in the 1930s, so they are not relevant to the modern market…until now.” Global note to the NDR standard cyclical bull field Two “Not met.”
Katie Stockton is the founder and Managing Partner of Fairlead strategy. She also does not like”percent qualifier”to the cattle dog and bear farm. On the contrary,”they need to be characterized by a series of high/low or lower high/low, respectively.” If none of these moves, we should assume that this is just a selling the relief rallies. She also noted that the definition of cattle dog and a bear market”should be expanded to include the duration.”
Peter Boockvar, chief investment officer of the Bleakley Advisory Group and edit the Boock report, also called it”Nonsense.” “The stock, from $ 50 to $ 10, then rebounded to $ 12″is not suddenly in the bull field. His preferred measure of the market looks at the breadth: when”most of the stock is low the 200-day moving average, I’ll think about it, bear markets, and Vice versa.”
Meb Faber, chief investment officer of Cambria Investment Management, reminded us that”bull field started to underestimate value.” 10-year PE ratio(Shiller CAPE), is his preferred measures. 2020 started with the Cape ratio to 31 March, as of last week had fallen to 24. Faber noted that the long-term valuation”still relatively expensive long-term average of about 18(and lower the inflation rate average is about 21).”
This problem, because he thinks it is,”the secular bull is usually at the beginning of the evaluation in the low Teens.” He reminds us that the great financial crisis start with the Cape Town about 13,and notes that bear markets often begin when the Cape ratio is 28. “We are still close to the overestimated value is relatively low and mobile to the global financial crisis, the low point is still decreased by 50%.” He looks at the movement of the low points as”a good rally in a bear market Field.”
A bear market rally
To say to this: Louise Yamada of Louise Yamada Technical Research Advisors also believe that we should be skeptical of the rally during the recession:”until proven otherwise, we will refer to it as a bear market rally, that there may be many within an ongoing trend. In 2002, there were three bears rally from 17 to 29 per cent, followed by the other leg; in 2007 there were four 11 to 20%. So now we have a rebound of 21%. . . We need to look at whether there is a subsequent decline to lower before, calling it a new bull to the farm.” Three
Jonathan is the image of the Light law, the chief market technician at Baxter partners, also saw a similar pattern in the historical data. “20 per cent off the low point is far from a clear signal. We only need to look back at prior bear market, such as 1929-1932,200-2003 and 2007-2009. All of these saw at least one, and in some cases several, of the 20%+rally off lows, as long as the back to break these lows before the bear market ends.” It reflected the light of the law keenly pointed out that, although”every bull on the field began a 20%rally, but not every 20%of the rally lead to a new bull to the farm.”
JC Parets, CMT President and founder of Allstarcharts, so that the case, this trend matterds a great deal:”the cattle market is a function of a majority of the stock moving in an uptrend at the same time. History of the amount of new low point(as we have seen in the past week)is exactly the opposite of the bull field. In case not obvious, these are the things that we see in the bear field!”
His colleague Tom Bruni, CMT added that,”if this is a bull on the field, it is the only one in history took place the most stock in the United States and around the World decline.”
There are existing cattle market of a date, whether it is in a bear market low point in 2009 to a new high point in 2013–even the end? John Roque, a former technician at George Soros’hedge Fund, and now managing Director of Wolfe Research, noted that we”don’t even know most of the people think that the existing(cattle).” He believes that the market behaved like a wounded athlete,”ran a long way very quickly.” Mr. Market has a fatal injury,”bounce the past 5 days is the same movement, push through the pain, the sheer adrenaline and courage.”
Caution is necessary
Some of the final warning notice from the technician. Parets wrote:”it is incredibly irresponsible to claim the unit is currently in a bull market when we are in the midst of one of the biggest stock market crash in history.” And Faber has a final warning:”because we don’t know how this pandemic plays a thoughtful investor needs to consider both cases, a frolic to the all time high point and dive to new lows. You ready?”
1. There are more long secular bull dog and a bear market with a short, counter-trend(cyclical)movement. Think of all the UPS and downs, in the long-term bear market that lasted from 1966 to 1982, or 1982-2000 as an example.
2. NDR-defined bull dog and a bear market: the
“A cyclical bull market on the field need 30%rise of the index in 50 calendar days or a 13%rise after 155 calendar days. Reversals of 30%in the Value Line Geometric Index since 1965 also qualify. A cycle bear market requires a 30 percent decline in the index after 50calendar days or 13%decline after 145 calendar days. Reversals of 30%in the Value Line Geometric Index also qualify…as you can see, the standard combination of time and price…of a larger decline, by a relatively short time frame, or a smaller decline over a longer time frame qualifications. We use the 30%reversal in the Value Line index of the geometry to grab market fluctuations, will likely miss time and price combination.”
3. She added:”Of course the stimulus measures could end the downward trend, but when income and credit quality of cos. Get revealed, downgrade, there could be another leg next month, all the non-technical, but thinking ahead Why could lead to another leg.”