Posts Tagged ‘bull market’

Bear Market vs. Bull Market

Wednesday, October 5th, 2011

It’s tough to be an optimist these days. Unemployment is high, economic growth is weak, and many leading indicators are pointed in the wrong direction. And that’s just in the United States. Elsewhere, Greece and other European countries are struggling to stay solvent, Japan is facing one crisis after another, and even China’s red-hot economic engine appears to be cooling down. So it’s no wonder the mood on Wall Street is bearish. And it’s no wonder investors are on edge. Market turnarounds can be sudden, and they can be spectacular. And if you abandon the stock market when it’s at or near a bottom, you abandon the opportunity to take advantage of the rebound. Being out of the stock market when a recovery occurs can be costly, as history shows.

Reviewing nine bear markets between 1960 and 2010 (defining a bear market as a decline of 20% or more in the S&P 500 over at least a two-month period), you’ll see that in nearly every case, the market experienced a strong rally soon after hitting bottom.

Throughout history, bear markets have been buying opportunities. Although we certainly don’t know when market or economic conditions might stabilize, and we’d be foolish to try to pinpoint any potential ‘trough,’ the historical implications are pretty clear.

S&P 500 bear market Decline
(from peak)		 One year later
1961–1962 –28.0%
(as of June 26, 1962)		 +31.3%
(as of June 27, 1963)
1966 –22.2%
(as of October 8, 1966)		 +33.2%
(as of October 9, 1967)
1968–1970 –36.1%
(as of May 26, 1970)		 +36.6%
(as of May 27, 1971)
1973–1974 –48.2%
(as of October 3, 1974)		 +37.9%
(as of October 3, 1975)
1980–1982 –27.1%
(as of August 11, 1982)		 +56.2%
(as of August 12, 1983)
1987 –33.5%
(as of December 4, 1987)		 +22.8%
(as of December 5, 1988)
2000–2001 –36.8%
(as of September 19, 2001)		 –12.5%
(as of September 20, 2002)
2002 –33.8%
(as of October 9, 2002)		 +22.8%
(as of October 10, 2003)
2007–2009 –56.7%
(as of March 9, 2009)		 +68.6%
(as of March 9, 2010)

Stocks in Asia ended in the red today, thanks to familiar concerns about the fiscal fate of Europe. Late Tuesday, Moody’s cut Italy’s sovereign debt rating by three notches to A2, with a negative outlook — echoing a similar downgrade from Standard & Poor’s last month.

Conversely, the major European benchmarks are pointed higher at midday. Italian Prime Minister Silvio Berlusconi’s office expressed a general lack of surprise at the Moody’s downgrade, and traders seem to share the government’s nonchalance. Instead, stocks are on the upswing after the Financial Times reported that euro-zone finance ministers are working toward a plan to recapitalize financial institutions. “Capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty,” said Olli Rehn, commissioner of economic and monetary affairs, in a statement to the paper. At last check, the German DAX has jumped 3.4%, the French CAC 40 is up 2.8%, and London’s FTSE 100 is 2.1% higher.

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DJIA Hits New High Then Pulls Back

Wednesday, March 30th, 2011

After coming within 8 points of new-high territory, the Dow Jones Industrial Average (DJIA – 12,350.61) lost some steam in the final minutes of trading, but still ended on a respectable gain of 71.6 points, or 0.6%. What’s more, the blue-chip barometer ended north of 12,300 for the first time since Feb. 18. The S&P 500 Index (SPX – 1,328.26) ended with a gain of 8.8 points, or 0.7%, notching its first finish atop the 1,320 level since March 9. However, the broad-market barometer retreated in the face of the 1,330 level, which has been conquered just once on a daily closing basis since Feb. 18.

Stocks catapulted higher right out of the gate today, as investors celebrated the latest round of deal-making and encouraging employment data. On the merger-and-acquisition front, Valeant Pharmaceuticals’ (NYSE:VRX ) hostile bid for Cephalon (NASDAQ:CEPH), as well as Salesforce.com’s (CRM - 134.49) acquisition of Radian6 , sparked optimism about the corporate cash supply on the Street. More notably, though, Automatic Data Processing (ADP) said the private sector added 201,000 jobs in March — in line with expectations, and prompting a collective sigh of relief ahead of Friday’s closely watched payrolls report. As the bullish stars aligned, the Dow Jones Industrial Average (DJIA) approached multi-year highs, with all three major market indexes ending comfortably north of breakeven.

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Risk Trade Is On; Markets Up 150 Points; Gold

Friday, September 24th, 2010

U.S. stocks opened strongly higher Friday, with the Dow industrials up more than 100 points, with Wall Street finding reason for cheer in a report on U.S. manufacturing in August. The Dow Jones Industrial Average DJIA rose 142.66 points to 10,805.08. The S&P 15.99 points to 1,140.82.

A report showing the largest decline in durable-goods orders in a year was cheered by economists and markets on Friday as attention focused on improved reading for capital goods. Orders for U.S.-made durable goods fell 1.3% in August, the Commerce Department reported Friday, dragged down by orders for transportation equipment decreased. Excluding transportation, new orders rose 2%. Analysts had expected a decline of 1.4% for durable-goods orders. Orders for nondefense capital goods excluding aircraft rose 4.1% in August, compared with a decline of 5.3% in the prior month. Analysts consider these core capital goods orders to be the best gauge of capital spending by businesses. Shipments of core capital goods rose 1.6% in August, compared with a gain of 0.1% in the prior month. This should bode well for” third-quarter gross domestic product.

Shipments in August fell 1.5%, compared with a gain of 2.5% in the prior month. Inventories of durable goods rose 0.4% in August, following a gain of 0.6% in July. The monthly durables report is volatile, with swings in demand for civilian aircraft and other expensive items. Durable-goods orders in July rose an upwardly revised 0.7%, compared with an earlier estimate of 0.4%

David Tepper comments pushed markets higher. Tepper of the hedge fund Appaloosa Management said on CNBC Friday that he’s getting back into stocks, and added he’s not interested in financials at the moment. Tepper’s bet on financial stocks at the bottom of the financial crisis helped to boost Appaloosa’s 2010 returns to 132.7 percent, net of fees. Performance documents from an investor show the fund was up nearly 42 percent through July. You could visibly see futures begin to move when Tepper said he was into stocks.

Other factors helping the market this morning: the sagging dollar, and its boost to multinational companies, the downsizing of the GM deal, and Petrobras’ plans to raise $70 billion in what would be the biggest initial public offering in the world. The funds would allow Petrobas to tap offshore oil reserves.

August new home sales are due at 10 a.m. and are expected to rise by 291,000 purchases from 276,000 in July, when sales plummeted to the lowest level on record.

Gold futures climbed above $1,300 an ounce on Friday, extending their record-breaking run, as the metal’s safe-haven appeal continued to draw investors. The most recent actions of several central banks have added fuel to fears regarding a depreciation race among global currencies. These fears should boost the gold price in the long run.

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Dow, S&P Rally to New Highs on Economic Data

Thursday, April 1st, 2010

Stocks kicked off the second quarter of 2010 on a high note this morning, as an upbeat report on unemployment fueled the bulls. The Labor Department noted that first-time claims for jobless benefits dropped by 6,000 last week to stand at 439,000, providing a glimmer of hope ahead of tomorrow’s marquee nonfarm payrolls report. The Institute for Supply Management (ISM) also contributed to the morning’s upbeat mood, with its index of manufacturing activity rising to a stronger-than-forecast 59.6% in March. However, with the equities market closed tomorrow for Good Friday, and that highly anticipated report on March payrolls slated for morning release, stocks were hit by a rush of profit-taking in afternoon trading. After tagging new highs in the first hour of trading, stocks spent most of the afternoon paring their early gains — until a last-minute buying boost pushed equities firmly back into the black.

Stocks had started the day strong after positive reports on initial jobless claims and manufacturing, but then pared gains in the afternoon as weakness seeped into the tech sector. 

A report from Challenger Gray & Christmas showed that planned layoffs for March surged 61 percent. The level remains well below the 2009 rate, the firm pointed out. Investors will get the all-important March jobs report Friday, despite the U.S. market holiday. Economic reports have been mixed this week, which has a lot of market pros pruning their forecasts.

Goldman Sachs today lowered its forecast to 275,000 jobs added to non-farm payrolls to 200,000 from 275,000. And the consensus is now down to 185,000. Whisper numbers had been up near 300,000. 

On the commodities front, oil prices jumped to an 18-month high near $85 a barrel, despite a stronger dollar, which climbed to a seven-month high against the yen. The dollar is expected to fall next week as this week’s economic reports have sent mixed signals on the strength of the recovery. Meanwhile, gold prices rallied, settling at $1,16.10 an ounce.

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Happy Anniversary to The 1 Year Bull Market!!

Tuesday, March 9th, 2010

Traders had expected some profit-taking today — even on stocks with good news — given how far the market has come in a year. Since March 9, 2009, the Dow is up 59 percent, the S&P rose 67 percent and the NASDAQ gained more than 80 percent.

The bulls have been forced to fight for every inch during the past several weeks, and this week is shaping up no differently. The S&P 500 Index (SPX) is now challenging its early January high near 1,150, while 10,600 appears to be the new 10,500 for the Dow Jones Industrial Average (DJIA). What’s more, the SPX has the added weight of its 160-month moving average overhead, a trendline that marked the index’s 2002 bottom and whose breach in October 2008 provided a clear demarcation between bull and bear markets. Additionally, the CBOE Market Volatility Index (VIX) rebounded yesterday, after sinking to within striking distance of a fresh multi-year low. The VIX was halted by resistance near the 18 level yesterday, but we could see the fear barometer spike to the 19 level and its 10-day moving average today. It appears that the bears have taken charge this morning, with futures on the Dow and SPX trading 35 points and 5.8 points below fair value, respectively.

Cisco CSCO  26.1599 has a big announcement slated for 11 a.m. ET. The networking-gear maker is expected to debut tools that will allow network-service providers to build their own high-speed networks. Cisco is taking a page out of Apple’s playbook, building hype in advance of the announcement. The company said yesterday that it’s announcement will “forever change the Internet and its impact on consumers, businesses and government.

China’s chief currency regulator reiterated the country’s commitment to U.S. Treasury’s for its foreign-exchange reserves, adding that China is not into short-term currency market speculation. He also said that it was “impossible” for gold to become a major investment channel for the country’s foreign exchange reserves.

In Europe

Greece Prime Minister George Papandreou is scheduled to meet President Barack Obama and is likely to press the U.S. to regulate hedge fund which Greece says had an important role in its debt problems. I highly doubt this will make an impact as regulating will delineate a free market concept.

Fitch issued a report about sovereign ratings in Europe in which it warned that Britain’s credit profile has deteriorated, pushing the pound to a 1-week low against the dollar.

A report by temporary-hiring firm Manpower showed that the outlook for U.S. hiring is dipping in the coming quarter, casting a shadow over hopes for a recovery in jobs.

Happy Anniversary to The 1 Year Bull Market!!

ACE

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