Is the stock market bottom near?

by | Oct 18, 2002 | Archives

There are some signals that the stock market may be about to rise. First, almost everyone finally seems discouraged. Second a dear friend of mine who has done so very well at market timing thinks the bottom is near. There is a third reason below you won't want to miss.

If we look at a chart of how the equity market has performed since WWII, you will see how between major bull markets the Dow runs through a series of sideways motions. This chart shows how the market had a crash beginning 2-9-1966 that is similar to the current freefall. Then you can see how in there was a rise of 48% over 26 months before it crashed again down 365 in 18 months.. Then there was another rise beginning May 26 1970 as the Dow rose 74% in 32 months before there was another 48% drop over 21 months. These rises and sudden falls happened two more times from 9-21 1976 through 8-12-1982. Then the bull market finally really took over.

So the market may rise in the short term for even as long as 33 months. But beware this rise is likely to be a short term bear market rally, with a falling U.S. dollar. The chart makes it look like the market was a lot better than it was. To cash in on a sideways period like this, one has to get in and stay in or get in when the market is at its bottom and then get out early, before each crash. Most investors do exactly the opposite.

Jyske Bank feels that the market may consolidate as well. You can see their most recent portfolio allocation analysis which recommends increasing your equity portfolio to 55% of your total investments (and 45% in bonds).

Personally I remain out of shares, because I invest in what I know, (my business, real estate and AAA rated bonds in my PIEC plan).

Until next message may all your investing be good!