Recent messages have looked at ways to spot trends. One way is to look for short term equity trends that fit into a big long-term picture. Yesterday’s low markets for the year confirm a dangerous trend.
We have been examining the current big trend in the U.S. economy for several years at this site. You can see this visually on a chart at https://www.garyascott.com/images/chart260702.gif
This chart looks at the past 100 years of Wall Street's performance and suggests that the stock market is in a long term 15 year down trend. See our message https://www.garyascott.com/market/606/ for more on this.
Then the shorter-term trend within this 100-year confirmation shows that there are several ups and downs within each 15 year down trend. You can see this visually at https://www.garyascott.com/images/20021121b.gif
This chart shows that these downtrends unfold in a series of 19 month to 32-month mini bulls followed by sudden and severe drops. In other words, U.S. equities will experience dangerous sideways movements for the next decade or so. For more on this go to https://www.garyascott.com/market/670/
The stock markets have been in the first short-term upward wave of the long-term downward trend. We have warned for some time that we should watch out for these sudden downturns. Yesterday’s new low for the year could well be that signal that this new dangerous trend has begun. The market has been looking shakier and shakier. There are numerous reasons the market can use as an excuse to crash. Rising interest rates. The war in Iraq. The huge U.S. federal deficit. New revelations of U.S. soldiers torturing Iraqis. These are just a few excuses the market may choose but the real reason is that this is the trend.
You will see in many messages at this site that I do not believe much in market timing. Just because the market is crashing does not mean you should exit good equity positions in a well-planned portfolio. However if you have just been enjoying a loft ride in a heady market, beware. The Dow could be headed to 8,800.
Until next message, good investing even if shares are headed down.