Monday, December 7, 2009

Stock market update

Warning:  this is research, not investment advice.  You invest at your own risk.

The Coppock Guide as well as the animal spirits stock market indicator continue up from below the zero line indicating that there is still emotional support for the rally on an adaptation level-theoretic basis.  The stock market index has been inflation adjusted.

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Comparing the current position to the long 1968 to 1982 bear market, it looks like we’re at about 1975.  The market will trade in a range for while, and then enter the final leg down to a bottom in three to six years, in about 2012 to 2015.  The previous range-bound episode lasted over a year.  Given the decennial weakness associated within the first few years of the decade, I don’t think range-bound trade will last that long this time.  I think we could see a top this winter.  Also, the pronounced tendency toward collapse early in a new decade suggests that we may not have to wait six years for the final bottom.

Capital preservation remains the name of the game.

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