The last blog motto (at the top of the page, under the title) was “The S&P 500 Will Take Out the March Low Soon.” Now that that prediction has come true, keeping alive my string of flawless prophecy, it is time for a new motto:
“Bear Market Growls Until January 2010″
This one is very unlikely to be accurate. However, I am willing to take the hit because so many traders insist on continuously trying to call a bottom, and I feel that it is my duty to pound some sense into them.
This is a very serious recession and bear market. It is not going away for a long time.
Note: I will likely change the motto to something more specific before 2010 – just as soon as I see a fresh, wide-spread delusion take hold.
Note: See this post for a run-down of previous blog mottos.
Matt.
1) Some time ago I closed out a large short position in DSL and loaded up on SRS. Any thoughts on when and whether it will hit it’s January high of 152?
2) Are you looking at any long positions?
Well looks liek you were right and I was wrong on looking for a bounce near-term. The fact that stocks lost ground despite a big drop in oil and the CRB is quite worrisome.
Looks like we will need considerably more capitulation before we can see even a decent bear market rally.
Crimson Ghost,
The VIX is moving up, however the spike everybody is looking for might require another spike of bad news like we had in January and March. Without another crisis, the market may just grind lower for weeks.
Matt
Hi Paul,
Congratulations on the DSL short. I like the SRS chart, but it just isn’t my area of expertise. Sorry.
My only long position is a tiny number of USO calls. There may be some stocks that do well during this recession, but I am not keen on looking for the needle in the haystack. I made so much money shorting this morning’s pop-and-flop – it was like taking candy from a baby – so, I can’t see why I would want to make my life more difficult by playing on the long side.
Matt
Matt, i have been making some good coin shorting the mkt intraday whenever it is up or taking the opposite direction based on my assessment of the reason for the move. unfortunately, i haven’t had the stomach to hold short positions overnight due the fear of an overnight rally, and this has caused me to miss out on some big moves. i would scale into short positions if the mkt was higher or near an inflection point like a few wks ago when dow was 13k, but the thought of losing gains overnight scares me. any advice on how to proceed?
Matt,
I think you can confidently project this bear market out a few years after 2010. We might have a few good years between now and ’15, but this bear markets usually last 17 years, so if you assume this one started back when the tech bubble burst, we still have a good 7 years left, and that is assuming an ‘average’ secular bear market.
There could be some good years in between, but this is going to be ugly. The ‘financial accelerator’ which boosted p/e’s and earnings on the way up is going to take all of that back and then some. Easy credit seems great for a few years, but it always sows the seeds for its eventual collapse.
Tony G,
I can’t tell you how to trade. Everybody has to find their own style. In my case, if I know I am in a recession and a bear market, I can hold short positions for ages without losing any sleep. Maybe you could get over your phobia by trading small. For example, maybe you could buy a very small number of shares of a short ETF and resolve to hold it for at least a week.
Matt
Hi Danny,
I think it’s safe to say that this recession will be a lot worse than traders have been thinking, but I won’t project it out as many years as you are.
Matt
Good call on the motto Matt. I will feed you with information from Asia on money and credit growth (or lack thereof). For the 10th time: This deflation and tightening will be global, Asia is just 12-18 months behind USA/W Europe. More dangerously, the boom and bust will maybe be higher and lower here due to excessive money supply growth.
Do me a favour? Follow the facts and statistics. As you say: the bottoming is a process, we should try to call it when we see it. Whether that is in 2009 or 2012.
Matt, looks like we are approaching a near term bottom based on the way i see the market fluctuating. based on my experience when the mkt begins to violently change direction such as yesterday’s action and today’s pre-market action, its usually a sign that a near-term bottom is somewhere in sight. i’m not saying we cant go down another 500 points but it feels like a rally could be in the making with anything positive, however, i will continue to play the short side until this happens.
Matt;
Well you were right on the market but looks like I was right about oil topping out.
I still say the odds of war with Iran are minuscule despite all the huffing and puffing in the US and Israel.
Crashing oil reduces the odds of crashing stocks even if the latter continue to drop.
Matt,
There is a difference between a recession and a bear market. I think we’ll probably dip in and out of recession for a few years, but the market will technically be in bear market territory for quite a while.
Danny, i think Matt is a bit more pessimistic than you are. So he should be.
Larry,
I don’t know about that…I’m awfully pessimistic!
Crimson Ghost,
Are you officially predicting a top in oil?
Matt
Danny,
I don’t think concepts like “bear markets usually last 17 years” are useful in trading. How does that help you make money? Did you short in 2000 and stay short all through the 2003-2007 bull? Even if you did do that, why would you?
Matt
Tony G,
Well, you have certainly covered all the possibilities in your prediction! Either a bottom or a crash.
Personally, I enjoy making concrete predictions. It’s much more fun when you get it right.
Matt