Doug Short overlays the 4 major bear markets of the past centruy onto
one chart. Its a comparison of today's S&P 500, the Dow post 1929,
the Nikkei post 1989, and the NASDAQ after the tech bubble:
And You Thought 1931 Was Bad
Delightful analysis, via Floyd Norris Saturday column:
"Even after Friday’s large stock market rally, only 10 of the stocks in the Standard & Poor’s 500, the premier American stock index, are higher than they were at the end of 2007, and the index itself is down almost as far as it was in the worst year it ever experienced, at the height of the Great Depression.
Another ugly day in the markets -- the Dow Industrials down nearly 6%, while the Standard & Poor's 500 (SPX) index lost 6.7%.
This is the lowest point since April 14, 1997.
Open Thread: What Now?
Ok, we have the Presidential election behind us, and ugly NFP yesterday (more to come) even more Bailouts soon (more AIG, more GM, who knows what else).
Market volatility still remains crazed, and we are nearing key levels of support. Earnings have been punk. The consumer is MIA. Credit is improving, Housing still stinks, and the deleveraging seems to be never ending. The Eliot Wave folks are waiting for a nasty wave 4 (or is it 5?) and
Crude Oil = $57
That's the first time since March 2007 that Crude has even broken $60.
Crude Oil, December Contract
Does the 1970’s Dow 1000 = 2000’s SPX 1000 ?
With 15 minutes left in today's trading, let's take a quick technical look at the past month's market action:
SPX 30 Days
My perspective: This 2 day pullback after the sharp 20% rally from the October 10th lows in the SPX is about a ~50% retracement of the inital rally, as well as the Electin Day revisit to those highs.
It appears that forays above the level 1,000 have twice brought out the sellers.
I wonder if SPX 1,000 will become the modern equivalent of the 1970s Dow 1,000 . . .
3X Exchange-Traded Funds
When we made our buy 'em call on October 10th, we wanted to avoid single stock risk. And, we wanted to have prudent exposure, while still maintaining some cash levels. Our solution was to deploy enough cash into 2 to 1 leveraged funds on the S&P (SSO) and the Nasdaq 100 (QLD) so that our managed accounts were 50% cash, and 100% effective market exposure. That worked out well.
Now, along comes an even more aggressive ETF: Triple upside and downside exposure. I have no opinion of these, as I have not really worked out the usages of this. It does seem a but excessive, and my friend Paul absolutely hates them.
Here is the full run of triple leverage ETFs. I wonder if Rydex will come out with a competitive product or not.
Fund Name . . . Symbol . . . Benchmark . . . Leverage
Direxion Bull Funds
• Large Cap Bull 3x
(BGU) Russell 1000 Index 300%
• Small Cap Bull 3x
(TNA) Russell 2000 Index 300%
• Russell 1000® Energy
(ERX) Energy Bull 3x Shares Index 300%
• Financial Bull 3x Russell 1000 Financial Services Index
Direxion Bear Funds
• Large Cap Bear 3x
(BGZ) Russell 1000 Index -300%
• Small Cap Bear 3x
(TZA) Russell 2000 Index -300%
• Russell 1000 Energy
(ERY) Energy Bear 3x Shares Index -300%
• Financial Bear 3x Russell 1000 Financial Services Index
Paul Disses the Triple Leverage ETF (Video)
10 Bullish Charts, Signals, Indicators (October 10, 2008)
Innovative Funds Benchmarked to Help Advisors and Investors Seeking to Outperform
Nov 03, 2008 11:41 ET
Dow off nearly 500 as of 3:30pm.
No clue as to why . . . maybe the 18% gain since October 10th is as good an explanation as anything else ?
Perhaps John Mayer has some insight.
VIX Slips Below 50
Who could have predicted that traders would be celebrating the decline of the Chicago Board Options Exchange’s volatility index below the 50 mark?
We saw the VIX peak late October, coincident with the worst of the credit freeze and market panic. The VIX closed yesterday at 47.76, down 11%, for the first close below 50 after an incredible run of 21 consecutive days above 50.
The VIX peaked late October, coincident with the worst of the credit freeze and market panic.
Volatility has begun to diminish as investors reduce their worry about the state of the markets, even as the outlook for the economy worsens.
One thing we learned: The prior measure for volatility "highs" around 30 are not reliable entry points for bad dislocations. They have in the past signaled sufficient panic that you could buy in, but that is a level that traders may no longer find much faith in.
Peter Boockvaar reminds us that the VIX has closed above 30 for 37 consecutive days, and may still surpass the period in 1998 during the Long-Term Capital Management debacle where it was above that mark for 50 days.
The current worldwide liquidity crisis may yet take a long time to stabilize . . . and I would expect the VIX to also take an equal amount of time to find a more moderate level.
Fear Returns to the Markets (September 18, 2008)
Chart of the Day: VIX versus SPX (June 23, 2008)
10 Year VIX versus SPX (June 24th, 2008)
Novembers in the Market
Dan Greenhaus is with the Equity Strategy Group of Miller Tabak + Co. He put out this fascinating analysis of what "Novembers" typically hold in store for us after nasty "Octobers"
Okay, so we all know October was down a fantastically ugly 16.94%, the steepest decline since 1987 when that October declined 21.76%. Going back to 1950, there have been 23 years in which October has been down by *any* amount from the prior September for an average decline of 3.15%. Subsequent to those 23 years, the following November saw an average gain of exactly 1%, while the following two months, at the end of December, saw gains of a much more substantial variety; up 3.54%. But of course the decline in this past October was outsized in comparison to the average October decline, so let’s narrow this down a bit. Using only instances in which October saw a decline of 3% or more (eight such instances), the average gain at the end of November was 1.67% while the average gain at the end of December was 3.70%. To a degree, this is not entirely surprising as one would assume that the steeper decline would lead to a steeper rebound. But in most of those instances, the decline was relatively modest. As I said, those 23 declines averaged about 3.15%, a far cry from October 2008. The only analogous decline was the drop in October in 1987 which led to a subsequent 8.53% drop in November 1987.
As I noted, the depth of the decline we just went through in October has only one parallel in the post 1950 time frame, which is 1987. So the next logical step is to head back to the 20s and 30s to get a handle on what occurred in that time period. Unfortunately, the Octobers of that time didn’t fare too much better. October 1929 was down 19.93%, October 1930 was down 8.88%, October 1932 was down 13.86%, October 1933 was down 7.82% and October 1937 was down 10.25%. In the first three instances I noted, the subsequent November was actually down an additional 13.37%, 3.31% and 5.89% respectively and November 1937 was down another 10.25%. Only November 1933 saw a gain, moving higher 10.27%.
The point is that while we would be inclined to think that a drop of the magnitude we just witnessed would, at the very least, produce a dead cat bounce, that assertion is not entirely supported by history.