Definition:
“A market as defined by its overarching, long-term trends. Generally, a secular market refers to trends over a period of five or more years. A secular market may be bullish or bearish, and, in market analysis, takes precedence over opposite, short-term trends that happen within the secular market. For example, the Great Depression in the United States lasted from 1929 until World War II (certainly a bearish secular market). Even though some years saw significant GDP growth (including 14.2% growth in 1936), this did not prevent the secular market from being bearish. Thus, a secular market describes general trends in the market without regard for anomalous trends in the interim.” From the Free Dictionary at...
http://financial-dictionary.thefreedictionary.com/Secular+Market
Market History – Dow Jones Industrial Average (thru 2005)
http://image.minyanville.com/assets/catalog/products/00KAT-Dow100YrsMV.jpg
I have included many posts by numerous market analysts over the years who
have suggested that the secular bear market that started in 2000 is not close
to an end.
I tend to agree with that view especially since the Nasdaq Composite is still 20% below its high in the year 2000. It would be a surprise if the worst financial crisis and recession since the Great Depression was accompanied by a long-term, bear-market no worse than the 14-year 1966-1982 bear. One must recognize, however, that it has been 13-years since the high in 2000 and the S&P 500 has now climbed 15% above the prior highs. One can argue the Secular Bear Market is over because the S&P 500 has significantly breached the prior high. Many do not agree with that view.
Many analysts (Hussman, Ritholtz, Easterling, etc.) suggest that since
the PE10 is at levels seen at the beginning of Bear-markets, not Bull-markets,
this bear market is nowhere near over. Suppose
the pundits are wrong? Suppose the bear market ended at the bottom in 2009 (at
low PE’s) and we entered another secular bull market that will last for another
10-years? Suppose the end was confirmed
when the old 1560 high was breached? (The S&P is now almost 1820.)
This is becoming a more popular thesis: The Secular bear market is over. I’m not convinced yet; but let’s not dismiss it entirely. Here are several articles that argue exactly that point.
MAXIMIZING PROFITS (THE SECULAR BEAR MARKET IS OVER) (Advisor
Perspectives)
“The stock market moves in long-term, i.e.
"secular", cycles that are either bullish or bearish. Most secular
bear markets have lasted between 10-15 years and the U.S. stock market entered
a secular bear market in 2000 when the technology bubble burst 13 years ago.
Given that we are well within the average timeframe for a new secular bull market
to begin, in 2011 I highlighted a number of fundamental reasons why investors
should begin preparing for such a shift…”“…a look at historical secular bull markets and comparing historical relative valuations with bonds and commodities suggests that over time, stocks are likely to prove to be the better investment, which is what legendary value investor Warren Buffett, the "Oracle of Omaha", has said himself. If you don't think I'm right, maybe you're willing to listen to him? Warren Buffett: Stocks Not in a Bubble; Best Place to Be for the Next 20 Years” - Chris Puplava, PFS Group. Lengthy commentary and Warren Buffet Video at…
http://advisorperspectives.com/dshort/guest/Chris-Puplava-131220-Maximizing-Profits-with-Turning-Points.php
ARE WE AT THE END OF A SECULAR BEAR MARKET? (Fidelity
Investments, Jan 2013)
Conclusion:“All in all, from a technical perspective there is some reason for optimism that we are getting close to the end of this frustrating period of market history. However, one thing gives me pause: each secular bear market I studied included at least three cyclical bear markets with declines of 20% or more. So far in this secular bear market, there have been only two: 2000–2002 and 2007–2009…
…In any case, while it is impossible to predict how markets will behave in the years ahead, this study of market history seems to suggest that maybe the worst is over. If so, it would be important for investors to look closely at their portfolios to make sure they are not too defensively positioned and that their investment allocations are in line with their long-term goals.” Jurien Timmer. Full commentary from Fidelity at…
https://www.fidelity.com/static/dcle/welcome/documents/Fidelity_End_Secular_Bear_Market_Jan13.pdf
HAS A NEW SECULAR BULL MARKET BEEN BORN? (Fox Business
News)
“…it is important to recognize that economic recoveries
don't die of old age. No, they typically die from a tightening of monetary
policy and/or financial or economic shock. In fact, the last three economic
recoveries lasted 7.7, 10.0, and 6.1 years respectively. So, the fact that the
current recovery is now entering its fifth year isn't necessarily a bearish
omen.
Other reasons to be hopeful that a secular bull has begun
include the following:
-Monetary policy will remain accommodative for the
foreseeable future (remember the Fed has said it has no plans to sell many of
the securities on their balance sheet)
-The economic expansion will likely be longer than normal
(Ned Davis Research Group projects the current expansion will run through 2017)
-The credit cycle has turned positive
-The housing market has turned -The automobile buying cycle has turned
-U.S. Manufacturing is improving…[and more in the original commentary]
…the bottom line is if the market continues to make new highs and those highs are confirmed by global markets, then we may have to be willing to recognize that a new secular bull market is upon us. One can hope, right?” Fox Business News at...
http://www.foxbusiness.com/news/2013/09/16/has-new-secular-bull-market-been-born/
SO IS THE BEAR MARKET OVER?
I don’t know, but the market has been steadily rising in
2013; VIX has been low; Gold has been crashing; and sentiment has been overly
bullish. That’s what I’d expect at the
end of a bear market. In conclusion, the
best answer is: It’s possible.
DON’T FORGET: Regarding risk, the S&P 500 fell over 20%
on Black Monday in October of 1987 (the worst day on record) with little warning and well after the end
of the last secular bear-market. Even if this is a new bull, one must set the
amount to invest in stocks at a level that allows a sound sleep…or at least one
that doesn’t keep you awake at night too often.
One of these days we will see that 20% drop that has been so elusive. Let’s just hope it doesn’t happen in one day!
MARKET REPORT
Monday, the S&P 500 was up 0.5% to 1828 (rounded) VIX fell 5% to 13.04.
Volume was down some, but not all that much for the Holiday.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing rose to 54%
at the close Monday. (A number above 50%
for the 10-day average is generally good news for the market.)
New-highs outpaced new-lows Monday, leaving the spread
(new-hi minus new-low) at +311 (it was +242 Friday). The 10-day moving average of change in the
spread was +21. In other words, over the last 10-days, on average, the spread
has increased by 21 each day.
Market internals improved again and remain positive on
the market.
Market Internals are a decent trend-following analysis of current market action, but in 2013 (so far), if I had been buying the positive ratings and selling negative ratings I would have under-performed a buy-and-hold strategy.
Sentiment was 80%-bulls at the close Friday and the 5-dMA of sentiment is 76%-bulls in the Rydex/Guggenheim long/short funds I track. These are incredibly high values and Friday’s closing value was the highest one-day reading I have seen in 2013. High sentiment is a negative indicator for the stock market – but they haven’t stopped the market all year.
The S&P 500 is 9.3%
above the 200-dMA and a value of 10% has led to small pullbacks in 2013 (and
corrections in 2011 and 2012). Other
indicators are all neutral of positive.
The most recent BUY signal for the NTSM system was 25
October. The “5-10-20 Timer” switched to
BUY from HOLD on 18 December.
MY INVESTED POSITION
