Bearish Information

[metalman]

Re: Bearish Information Re. Carl Swenlin

jim, are we officially in a bear market? is itulip dec. '07 bear market in '08 call 'right' yet? you've been saying since the call that 'we'll see if it's right'.

is it yet by jim nickerson standards? everyone's calling it a bear market now.

other forecasts...

1. The first half of 2008 will prove to be a very bullish period and that the second half of the year will be flat or bearish.
http://carlfutia.blogspot.com/2008/0...-for-2008.html

2. Richard Russell says Secular Bull Market Continues

figures... russell is right 39% of the time...

better than fleckenstein at 30%

waaaay better than steve saville at 13%

[Jim Nickerson]

Re: Bearish Information Re. Carl Swenlin

jim, are we officially in a bear market? is itulip dec. '07 bear market in '08 call 'right' yet? you've been saying since the call that 'we'll see if it's right'.

is it yet by jim nickerson standards? everyone's calling it a bear market now.

other forecasts...

1. The first half of 2008 will prove to be a very bullish period and that the second half of the year will be flat or bearish.
http://carlfutia.blogspot.com/2008/0...-for-2008.html

2. Richard Russell says Secular Bull Market Continues

figures... russell is right 39% of the time...

better than fleckenstein at 30%

waaaay better than steve saville at 13%

metalman, I don't personally have a standard wherein I "make a call" of it being a bear market. Markets have been down since various dates in October 2007.

Just for funning with you, here's one guy's impression from Raymond James. http://online.barrons.com/article/market_watch.html

Goodbye, June Swoon
Investment Strategy by Raymond James
880 Carillon Pkwy., St. Petersburg, Fla. 33716
July 1: Goodbye and good riddance to this year's "June-swoon" stock-market debacle....We can count on one hand the selling stampedes that have lasted for more than 30 sessions. Moreover, we reiterate that our proprietary oversold indicator is more oversold than it has been in years. Therefore, unless the equity markets are in "crash mode," we would not be short of stocks right here.

-- Jeffrey Saut

From my own data count, the DJI is 43 days down from its top, the SPX 32 days, but then the NDX, Nasdaq, RUT and VGY are only 20 days from their tops. So far there has been some lack of unanimity amongst the indices in the lengths of the current down move, and I have no idea as to how it will resolve, but from their last peaks to the current troughs the six indices I mentioned are down an average of 12.6% compared to 1/22/08 when the average losses were 15.1%. So no telling how much further down the current trend could run. No one knows.

[metalman]

Re: Bearish Information Re. Carl Swenlin

So no telling how much further down the current trend could run. No one knows.

ej said mar. 2000... nasdaq off more than 80% before bottom. dec. 2007 said... indexes 20% to 30% off in 2008. so far off 15% nominal, 20% real. if it turns out to be true, another lucky guess?

[Jim Nickerson]

Re: Bearish Information Re. Mike Burk

ej said mar. 2000... nasdaq off more than 80% before bottom. dec. 2007 said... indexes 20% to 30% off in 2008. so far off 15% nominal, 20% real. if it turns out to be true, another lucky guess?

As I wrote above, no one knows.

Mike Burk in his weekly analysis of various breadth measures concludes: "The market is as oversold as it has been at any time in the last 10 years. A bounce is likely and it could be of significant magnitude. Following the bounce a retest of the current low is likely."

One parallel he drew was to the "swoon" of the markets to July 23, 2002 with a subsequent runup of 20.2% on 8/22/02, a period of 22 trading days.

Burk's analysis if not available now on http://www.safehaven.com/ should be later today.

[metalman]

Re: Bearish Information Re. Mike Burk

As I wrote above, no one knows.

and some don't know more than others don't know.

[Jim Nickerson]

Re: Bearish Information Re. China

It occurs to me that the general opinion of how China's markets would do this year is that they would do well until after the Olympics. I don't watch much TV so I guess I missed the Beijing Olympics.

http://www.telegraph.co.uk/money/mai.../ccview107.xml

Oil price shock means China is at risk of blowing upBy Ambrose Evans-Pritchard Last Updated: 12:33am BST 07/07/2008

The great oil shock of 2008 is bad enough for us. It poses a mortal threat to the whole economic strategy of emerging Asia.

The manufacturing revolution of China and her satellites has been built on cheap transport over the past decade. At a stroke, the trade model looks obsolete.
.
Products are sent to China for final assembly, then shipped again to Western markets. The snag is obvious. The cost of a 40ft container from Shanghai to Rotterdam has risen threefold since the price of oil exploded.

"The monumental energy price increases will be a 'game-changer' for Asia," said Stephen Jen, currency chief at Morgan Stanley. The region's trade model is about to be "stress-tested".

Energy subsidies have disguised the damage. China has held down electricity prices, though global coal costs have tripled since early 2007. Loss-making industries are being propped up. This merely delays trouble.

No surprise that Shanghai's bourse is down 56pc since October, one of the world's most spectacular bear markets in half a century.

"The true impact of the shock will only be revealed over time, as subsidies are gradually rolled back," he said. Last week, China raised internal rail freight rates by 17pc.

BP 's Statistical Review says China's use of energy per unit of gross domestic product is three times that of the US, five times Japan's, and eight times Britain's.

China's factories "were not built with current energy levels in mind", said Mr Jen. The outcome will be "non-linear". My translation: China is at risk of blowing up.

Any low-tech product shipped in bulk - furniture, say, or shoes - is facing the ever-rising tariff of high freight costs. The Asian outsourcing game is over, says CIBC World Markets. "It's not just about labour costs any more: distance costs money," says chief economist Jeff Rubin.

Xinhua says that 2,331 shoe factories in Guangdong have shut down this year, half the total.

North Carolina's furniture industry is coming back from the dead as companies shut plant in China. "We're getting hit with increases up and down the system. It's changing the whole equation of where we produce," said Craftsmaster Furniture.

China is being crunched by the triple effects of commodity costs, 20pc wage inflation, and sagging import demand in the US, Canada, Britain, Spain, Italy, and France.

Critics warn that Beijing has repeated the errors of Tokyo in the 1980s by over-investing in marginal plant. A Communist Party banking system has let rip with cheap credit - steeply negative real interest rates - to buy political time for the regime.

Whether or not this is fair, it is clear that Beijing's mercantilist policy of holding down the yuan to boost exports share has now hit the buffers.
Foreign reserves have reached $1.8 trillion, playing havoc with the money supply. Declared inflation is just 7.7pc, but that does not begin to capture the scale of repressed prices, from fuel to fertilisers. "There is a lot more bottled-up inflation in this economy than meets they eye," says Stephen Green, from Standard Chartered.

Inflation merely steals growth from the future. It defers monetary tightening until matters get out of hand, which is where we are now. Vietnam has already blown up at 30pc. India is on the cusp at 11pc, so is Indonesia (11pc), the Philippines (11pc), Thailand (9pc) - leaving aside the double-digit Gulf.

Of course, oil prices may fall again. They plunged to $50 a barrel in early 2007 after the Saudis raised production. The scissor effect of slowing global growth and extra crude later this year from Brazil, Azerbaijan, Africa, and the Gulf of Mexico may chill the super-boom.

The US Commodities Futures Trading Commission is on an "emergency" footing, under orders from the Democrats on Capitol Hill to smash speculators. If it is really true that investment funds have run amok, we will soon find out.

I suspect that the energy markets have fallen prey to their own version of the "shadow banking system" that so astonished regulators when the credit bubble burst.

I also suspect that Hank Paulson and his EU colleagues have a surprise up their sleeve for the late-cycle über-bulls. Those who claim that derivatives (crude futures) cannot drive spot prices have overlooked a key point. The Saudis and others use the IPE Brent Weighted Average of futures contracts as their pricing mechanism. Futures now set the spot price.

But even if oil comes down for a year or two, the mid-term outlook of the International Energy Agency warns that crude markets will be tighter than ever by 2012. Call it Peak Oil, or just Peak Non-Cooperation by the dictatorships that control most of the world's remaining 5 or 6 trillion barrels (Mankind has used one trillion so far).

Come what may, globalisation has passed its high-water mark. The pendulum will now swing back from China to America. The mercantilists will have to reinvent themselves.

If there are 5-6 trillion barrels of oil left, it seems it will take a while to grow the population to burn up that much oil, but I have no doubt it will happen.

[Jim Nickerson]

Re: Bearish Information Re. Aden Sisters DJI

http://www.marketwatch.com/news/stor...42C41661F20%7D

PETER BRIMELOW
Adens see the bear necessitiesCommentary: They project Dow declining to 10,000 level or lower

They write: "The U.S. stock market took a turn for the worst this month, falling sharply, and it pulled the global markets down with it. A bear market took hold and while a rebound rise is probable, the risk of holding stocks is high."

The Adens' macro view: "Stagflation is becoming more dominant and the Fed is in a tight spot. That's why it's keeping interest rates low because it'll help the economy, despite higher inflation."

The Adens are bearish on the dollar, bearish on bonds longer term. They expect gold to continue its "mega-bull market" after possibly building a base below $1,000 for the rest of the summer.

Their projections on the stock market are among the most alarming I've seen for a long time. Looking at a point-and-figure chart they write: "The Dow could eventually decline to around the 10,000 level as a downside target. Interestingly, the average bear market decline over the past 50 years has been 29.2% on the S&P 500. Extending this average decline to the Dow Industrials and using its 2007 peak at 14,164, gives us a downside target of 10,000 as well... this could quite possibly be the Dow's next downside target. If the Dow were to close below 10,725 it would be a bad sign, and especially below 10,000."

How bad? The Adens point to a semi-log chart of the Dow since 1982. They write: "Note that it's been in a solid uptrend since then, but now the Dow is breaking below this 26-year uptrend ... the Dow's percentage growth is changing. That is, the booming stock market days since 1982 are over and if the Dow were to eventually retrace 50% of its huge bull market rise from 1982 to 2007, then it could theoretically drop to near the 7,500 level, which would be similar to the bear market drop in 1974.

[Chris Coles]

Re: Bearish Information

The real threat to China is not oil price, or transport costs, it is smog.

You cannot see the sun or blue sky for much of the time over much of Eastern China. We are all too ready to forget that, with such a large population, food grows in sunlight. No sun, no food.

I gather the Yank-see River is very low this year. Again the same applies, no sunshine, no convection in the atmosphere, no convection, no clouds, no clouds, no rain, no rainfall no water run off in the rivers. No rain, no rivers, no crops.

I give it another year before the real difficulties really start to sink in and panic starts. As for the Olympics, they already have a very real problem caused by... yes, you have guessed it, smog. But during the games, all traffic will be stopped and everything will be done to create a short term illusion of smog not a problem....

Sometime soon, they are going to have a harvest failure and then all bets are off because they will do their utmost to buy all the food they can get their hands on....

Oil price, wait till wheat reaches $500, then we will see the reality.

[Jim Nickerson]

Re: Bearish Information Re. Russell analysis.

A nice analysis of possibilities. Interesting to me is the part of the gap is Lowry's Buying and Selling Pressure Indices. It would be interesting to know how that is calculated. I presume it is proprietary. I looked once at subscribing to Lowry's but I was too cheap to go the $700 annual fee I believe it was. Russell is the only person I come across who references Lowry's Buying and Selling Indices.

http://www.investmentpostcards.com/2...008/#more-1575

Richard Russell (Dow Theory Letters): There is still too much complacency

“(1) There’s still too much complacency. Many commentators are saying that the market is at a major bottom. Many analysts are talking about stocks being on the bargain counter – most are offering lists of stocks to buy. This isn’t the atmosphere I’d expect if we’re moving into a major market bottom.

“On a short-term basis the stock market is severely oversold. We should be close to some kind of a short-term rally. This could dovetail with a short-term correction in the price of oil.

“(2) The D-J Transports are still holding above their January 17 low of 4,140.29. I have no idea whether the Transports will continue to hold or not. It would be a huge plus if the stock market can become extremely oversold (in a major way) while the Transports are still holding above 4,140.29, but I’m beginning to doubt whether that’s going to happen.

“(3) I can’t get the October-November time period out of my mind. So many major declines have ended during October-November, I’m wondering if this decline is going to end during the fourth quarter as so many others have.

“(4) The 1942 and 1949 major bear market lows ended with the Lowry’s Buying Power Index and Selling Pressure Index about 100 points apart with Selling Pressure the dominant Index. The brutal 1974 market bottom ended with the two indices 250 points apart. Currently, Selling Pressure is over 520 points above Buying Power, and I imagine today’s greater volume and more stocks traded is partly responsible for the higher figure. At any rate, this is the largest negative spread in the 75 years of Lowry’s.

“Still, it’s amazing that the spread between Buying Power and Selling Pressure is now so huge. And it is still widening. Logically, somewhere ahead the spread must terminate – every trend has its limit. And at that ‘limit’ point, the stock market will have reached its long-sought bottom.

“How will we recognize that bottom? One way is that following a final wash-out, the tide will turn, and the big institutional money will rush back into the market. This will often produce a 90% up-day. At that juncture, we will see heavy volume on the upside. The whole tenor and feel of the market will change. We’re not there yet.

“(5) I have no idea what might set off or cause any future bull market. It might even be basically a foreign bull market which simply ‘rubs off’ on the US. I don’t know how it might work. I just think that somewhere ahead a new mighty bull market is waiting. But, of course, we have to get through this current bear market first. And so far, there’s little to suggest that the bear market is over.”
Source: Richard Russell, Dow Theory Letters, July 7, 2008.

Here's a followup comment by Russell from same source as above.

Richard Russell (Dow Theory Letters): Market’s bottoming process could take several years
“I talked to Paul Desmond (head man at Lowry’s) yesterday. He said that one reason for the huge spread between the Selling Pressure Index and the Buying Power Index (compared with spreads in the past) has to do with the massive increase in NYSE volume over recent years.

“Paul also offered the opinion that the lows of this market maybe take place over an extended period of time such as the extended low base of 1980 to 1982. And I agree with Paul – I’ve been thinking the same thing. The problems now imbedded in the US (and the world) economies are so severe that it could take several years of a bottoming process before the next bull market can get started.”
Source: Richard Russell, Dow Theory Letters, July 11, 2008.

[bart]

Re: Bearish Information

Some more perspective:

[Jim Nickerson]

Re: Bearish Information Re. Faber on China

Bloomberg 7/7/08

China Bulls Wrong; Stock Rout to Worsen, Says Faber (Update2)

By Chua Kong Ho

July 7 (Bloomberg) -- Investors betting on a rebound in China's tumbling stocks are setting themselves up for more losses, according to Marc Faber, who told investors to bail out of U.S. stocks before 1987's so-called Black Monday crash and correctly predicted last August the U.S. would enter a bear market.

Faber's forecast contrasts with local stock analysts, who are as bullish as ever even after a 51 percent plunge in the CSI 300 Index since its October record. ``Buy'' calls still make up two-thirds of all recommendations for Chinese stocks, virtually unchanged from the market's peak, according to Bloomberg data.

``I just wouldn't buy,'' Faber said in an interview from Bangkok July 4.

``When a bubble bursts, you only hit bottom when people totally give up and vow they'll never buy stocks again. People are still more worried they'll miss the next rally.''

China's rout has wiped out more than $2 trillion in market value after the government raised interest rates six times last year to cool the economy and commodities prices surged, fanning inflation. The CSI 300 more than doubled in 2006 and 2007, making its shares the world's priciest and prompting the government, Alan Greenspan, Warren Buffett, and Faber, to warn of a bubble.
Investor Confidence

The last time Chinese stocks fell by half -- from a June 2001 high -- the Shanghai Composite Index took four years to reach its low. More than 60 percent of China's retail investors are ``confident'' about the performance of the nation's stock market in the next two years, the Shanghai Securities News reported July 4, citing a survey it conducted with StockStar.com, a provider of financial data via the Web.

The declines sent valuations for stocks on the CSI 300 Index to their lowest in more than two years last week, with the benchmark trading at 19.9 times reported earnings, a level last seen in April 2006. Liu Yang, managing director at Atlantis Investment Management Ltd., which oversees about $4 billion in assets, expects a rebound.

``Fundamentals are very strong in China compared to any other Asian nation,'' said Hong Kong-based Liu. ``Chinese stocks are trading at crisis valuations. Do they deserve to trade at crisis valuations? The answer is no. The market deserves a very good rebound from here.''

The CSI 300 Index rose as 5.1 percent today, the most in more than two weeks.

Record Oil

China, the world's fastest-growing major economy, grew 10.6 percent in the first quarter. That's the ninth straight quarter growth has exceeded 10 percent. Record oil prices have eroded earnings, with Chinese industrial companies increasing profits at half the pace in the first five months compared to a year earlier, official data show. Inflation was 8.1 percent in the first five months, the fastest pace since 1996.
Faber, publisher of the Gloom, Boom & Doom Report, also said Chinese shares could bounce off lows, though only temporarily.

``We could have rebounds of 20 to 30 percent, but I wouldn't bet on it,'' Faber said. ``I would rather use rebounds as a selling opportunity.''
Japan's Nikkei 225 Stock Average plunged 60 percent in two and a half years from its December 1989 high; today it's slightly more than a third its peak of 19 years ago. The Nasdaq Composite Index plunged 78 percent in 31 months from its March 2000 record.

``Like the Nasdaq when the bubble burst in 2000, it rebounded but we're still 50 percent lower today than we were in 2000,'' said Faber. ``This is eight years later.''

To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at Kchua6@bloomberg.net
Last Updated: July 7, 2008 03:33 EDT

[Jim Nickerson]

Re: Bearish Information

Some more perspective:

bart, thanks for the chart. It bothers me.

If the SPX were to be adjusted to Euro terms, the loss would be greater from the October top to this past week's lows. Similiarly adjusting the $VIX by the Euro shows the graph here http://stockcharts.com/h-sc/ui?s=$VI...d=p53362332274 (I wish I had the skills of Lukester to get that picture to show up here, but I don't).

What I see in that stockcharts graph is that the level of the VIX has been "stepped down" a notch or two compared to the periods of spikes in 2000-2002.

Just using the stockcharts' generated highs and lows labelling on the graph, back in 2000-2002 period the highest the VIX got in Euro adjusted terms was .4727, and the lowest in there was .1920. Dividing the higher number by the lower, the spike could be roughly stated to have been 2.461979 times the lower figure.

Using the current period 2007-to date, the highest VIX adjusted by the Euro was .2301, and its lowest .0758. Dividing the top by the bottom, the spike here has been 3.0356.

This amounts to the Euro adjusted VIX's relative increase from current period lows to being 23.3% higher than the moves from the adjusted moves for the VIX back in early part of the decade.

I often think people can show anything they wish in using numbers in arguments, but is not this comparison a valid one?

Edit: I went back and using a eyeball measurement, the $VIX:$XEU low was ~.175 around the first of July 1999. Using that low, the 23.3% figure above turns to being 12.37%, so relatively using the $XEU adjustment, the $VIX is higher now than at anytime in the 2000-2002 period.

[bart]

Re: Bearish Information

bart, thanks for the chart. It bothers me.

If the SPX were to be adjusted to Euro terms, the loss would be greater from the October top to this past week's lows. Similiarly adjusting the $VIX by the Euro shows the graph here http://stockcharts.com/h-sc/ui?s=$VI...d=p53362332274 (I wish I had the skills of Lukester to get that picture to show up here, but I don't).

What I see in that stockcharts graph is that the level of the VIX has been "stepped down" a notch or two compared to the periods of spikes in 2000-2002.

Just using the stockcharts' generated highs and lows labelling on the graph, back in 2000-2002 period the highest the VIX got in Euro adjusted terms was .4727, and the lowest in there was .1920. Dividing the higher number by the lower, the spike could be roughly stated to have been 2.461979 times the lower figure.

Using the current period 2007-to date, the highest VIX adjusted by the Euro was .2301, and its lowest .0758. Dividing the top by the bottom, the spike here has been 3.0356.

This amounts to the Euro adjusted VIX's relative increase from current period lows to being 23.3% higher than the moves from the adjusted moves for the VIX back in early part of the decade.

I often think people can show anything they wish in using numbers in arguments, but is not this comparison a valid one?

Yes, of course on the charting and stats issue - one can "make" charts or spin stats to prove most points.

Mostly I posted it just as perspective on the bearish side.

But to your points about expressing the issue in terms of Euros - you could also be "accused" of the same thing, and I don't mean that negatively. Why not express it in gold for example? The various measures all have built in biases is my basic point, and in case its not clear. Plus, differences of opinion is literally what makes markets.

And in the more general case of bear markets, what I think the chart shows is that on the intermediate and longer term, we have not yet seen the kind of fear, despair etc. that mark major bottoms. I also do not exclude bounces or more "trades within a trade" as EJ has observed, not do I exclude the small possibility that we have bottomed. Judging major bottoms on the basis of one chart is not wise.

[jk]

Re: Bearish Information

bart, thanks for the chart. It bothers me.

If the SPX were to be adjusted to Euro terms, the loss would be greater from the October top to this past week's lows. Similiarly adjusting the $VIX by the Euro shows the graph here http://stockcharts.com/h-sc/ui?s=$VI...d=p53362332274 (I wish I had the skills of Lukester to get that picture to show up here, but I don't).

What I see in that stockcharts graph is that the level of the VIX has been "stepped down" a notch or two compared to the periods of spikes in 2000-2002.

Just using the stockcharts' generated highs and lows labelling on the graph, back in 2000-2002 period the highest the VIX got in Euro adjusted terms was .4727, and the lowest in there was .1920. Dividing the higher number by the lower, the spike could be roughly stated to have been 2.461979 times the lower figure.

Using the current period 2007-to date, the highest VIX adjusted by the Euro was .2301, and its lowest .0758. Dividing the top by the bottom, the spike here has been 3.0356.

This amounts to the Euro adjusted VIX's relative increase from current period lows to being 23.3% higher than the moves from the adjusted moves for the VIX back in early part of the decade.

I often think people can show anything they wish in using numbers in arguments, but is not this comparison a valid one?

Edit: I went back and using a eyeball measurement, the $VIX:$XEU low was ~.175 around the first of July 1999. Using that low, the 23.3% figure above turns to being 12.37%, so relatively using the $XEU adjustment, the $VIX is higher now than at anytime in the 2000-2002 period.

jim, i don't think it makes sense to "correct" the vix by the euro's value. it does make sense to correct the spx- that's what an investment in the s&p looks like to a eurozone investor. but the volatility isn't any different, irrespective of your geographic point of view. it's like correcting u.s rainfall for the euro's value - it doesn't mean anything.

[Jim Nickerson]

Re: Bearish Information

Yes, of course on the charting and stats issue - one can "make" charts or spin stats to prove most points.

Mostly I posted it just as perspective on the bearish side.

But to your points about expressing the issue in terms of Euros - you could also be "accused" of the same thing, and I don't mean that negatively. Why not express it in gold for example? The various measures all have built in biases is my basic point, and in case its not clear. Plus, differences of opinion is literally what makes markets.

And in the more general case of bear markets, what I think the chart shows is that on the intermediate and longer term, we have not yet seen the kind of fear, despair etc. that mark major bottoms. I also do not exclude bounces or more "trades within a trade" as EJ has observed, not do I exclude the small possibility that we have bottomed. Judging major bottoms on the basis of one chart is not wise.

Thank you, bart, for your opinion.

It seems a fact that here someone is always referencing some value as "real" when adjusted by some other factor. "Real interest rates" and then one gets into whether to use BLS lies, shadowstats.com's numbers, or
BLS+lies to suggest what may be "real."

Then talking about gold's 1980's peak being no where near what would represent an inflation adjusted peak.

And then there is income and inflation-adjusted income, ad infinitum.

There seems no end to discussion and considerations between what is real and what is not.

I obviously don't know the answer.

Holy-moly! Look at the $VIX's behavior vs. the $SPX when both are adjusted by the $USD--US dollar index.

What does this all mean? Rhetorical question.

http://stockcharts.com/h-sc/ui?s=$VI...d=p99939916006