Dividend Growth Investing, Retirement Income, Stock Market Investing, Stock Market Timing, Uncategorized

Are We Being Stalked by a Bear?!?!?

No mystery folks… the market is in a tizzy. It got high. Risk got to a place where it was unsustainable, and now it is in need of another healthful ‘flushing’ of market risk.

Here are the poignant facts. This Bull Market was born on Monday, March the 9th of 2009. It now 6 years old, going on 7, and is among the oldest of Bull Markets on record. Next, there is the old and venerable Dow Theory Market Timing System and Signal. The Dow 30 Industrials made a new all-time high in early March… but the Industrial’s high was never confirmed by the Dow Transports also hitting a new all-time high… so, something is saying that we’ve got a problem. Is it the end of the Bull Market? Don’t know; can’t say. But I do know just what to be looking for, and so, I’ll be paying close attention to those things.

We have the 5 sure signs that must precede any Bear Market… price must fall thru its own 50-day moving average. Price must fall thru its own 200-day moving average. The 50-day moving average must roll over and commence to trend downward. The 50-day moving average must pierce the 200-day moving average… and, the 200-day moving average must also roll over and commence to trend downward. Even with all 5 of those happening… that does not necessarily mean for a certainty that we have entered into a Bear Market, but when we do, all 5 of those things must happen! A 6th possibility might also happen, and typically serves to confirm a new Bear Market, and that is when price reverses back to the upside, penetrates its down-trending 50-day moving average, but cannot clear its already down-trending 200-day moving average. That down-trending 200-day becomes a point of resistance that price is not able to overcome, and the market falls away from there, confirming that with almost near certainty, a new Bear Market is in progress. This actually did happen the last two Bear Markets… the first in 2000 and the last one in ’08.

Another Wall Street definition is that a decline of 10% is a correction, but a decline of 20%, or more, signifies a Bear Market. Not too terribly helpful, as no one wants to experience a 20%+ haircut, and then be told… “O, gosh, this must be a Bear Market!!!”

The other point, which we must not lose sight of, is the old trader’s tool of maintaining a 17-month moving average of the S&P 500, and seeing how this month’s price ends in relation to its own 17-month moving average.

So, just sit tight and relax. It’s only the 17th, and expiration day, which can be quite hairy in its own right anyway. Typically, when we experience an extreme in price movement on expiration day… you wait, and you look to see what happens the following Monday, as that day will often reverse the extreme move of the expiration Friday. If today closes down hard, look for it to reverse to the upside Monday. If it does not, we may be in for a considerably rougher April than many were anticipating…. Which would be perfectly alright with me, as I am wanting to deploy a slug of cash that has been accruing since mid-October of last year into many more shares of our very safest-dividend growing stocks… because, I’m all about safely growing our portfolio dividend income, until we attain unto our first-year retirement income goal. We’re 1/4 of the way there now in less than 4 years time, and we are in the process of multiplying our portfolio dividend income for a second time, as we race toward our goal by means of harnessing the principle of compounding growth to our stock market investment program. It’s time to have some caution, but it’s no time to be fearful, or panic, or even be a seller. let the others do all that. We want to become aggressive buyers about the time they’ve worn themselves all out, and we’ve got us another “low-risk market entry opportunity.” It will come… it always has.

Here’s to your investing success!
Harold F Crowell

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