Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Treat Any Stock Market Weakness as a Buying Opportunity

Stock-Markets / Stocks Bull Market Sep 02, 2009 - 07:49 PM GMT

By: Money_and_Markets


Best Financial Markets Analysis ArticleClaus Vogt writes:  The seasonal market statistics are clear: September has historically been the worst month for stocks of the year. Plus it’s followed by October, the month of the most spectacular stock market crashes in history.

This is why many bears — who have actually gotten more visible again during the past few weeks — say it’s time to get out of the market now.

These seasonal stock market statistics are certainly true. And after the strong gains since the July interim low, the market is due for a correction.

So the market may pull back a bit in the short term. But I don’t see it being more than a correction.

In fact, if stocks do go down during the next few weeks, you should probably consider that a buying opportunity.

Here are my arguments for that medium-term bullish view …

During This Phase of the Business Cycle Fundamentals Do Not Matter …

To begin with, I want to put into perspective the power of bearish arguments based on the state of the economy.

First, during this phase of the business cycle — that is at the end of a recession or the beginning of a new economic uptrend — fundamentals do not matter for the financial markets. That’s because they’re mainly liquidity driven and based on hope, not on facts.

The gloomy state of the economy doesn't mean a lot to the markets right now.
The gloomy state of the economy doesn’t mean a lot to the markets right now.

Moreover, economic data are a mixed bag at best. So the bulls and the bears can pick whatever news underlines their respective arguments. Only later during the cycle do fundamentals have to pick up to replace hope with facts. If they don’t, the bear will return.

Second, the Index of Leading Economic Indicators (LEI) rose four months in a row, finally crossing the zero line in July with a reading of 0.2 percent. This indicator has an excellent track record of calling important turning points in the economy. Right now it’s indicating the end of the recession. So there’s a good and historically valid reason for the above mentioned hope for some kind of a recovery.

Third, the stock market has a shorter time horizon than most of the fundamentally-based bearish arguments. So they’re not important now, but will start to matter later. And I expect the LEI and other time-proven indicators to warn us before this time arrives. Therefore, during the next three or four quarters I cannot see how the economy could collapse again, especially after all the recent massive worldwide stimulus programs.

Fourth, the stock market can ignore fundamental headwinds for a very long time. Fundamentals are long-term drivers of the financial markets. They have no short-to-medium-term predictive value. The very strong momentum of the current stock market rally gives you a clear hint that this rally has the power to ignore a lot of bad news for some time to come.

Plus …

The Market’s Technical Signals Are Pointing to Strength …

Some medium-term bullish developments have taken place during the past weeks and months. You’ll see in the chart below, a very clear bottoming formation with a technically strong upside breakout.

S&P 500, Volume, Price Momentum Oscillator (PMO) 2008 — 2009

S&P 500 Large Cap Index


Let me explain the specifics in this chart, plus a few other technical indicators that aren’t shown …

First, most major indexes show very solid chart patterns. Take the S&P 500 as an example. You can see a nice bottoming formation, which started to develop in October 2007. The breakout, which happened this July, is a clear medium-term buying signal.

It indicates a medium-term trend change from down to up. The formation is an inverse head and shoulders, one of the most reliable patterns.

Second, coming off of the March 2009 low, momentum indicators (the rate of acceleration of price or volume) shown as PMO in the above chart, reached extremely overbought levels. This is typically a sign of impulse or a kick-off move.

Third, the breakout above the neckline of the bottom formation (950-955 in the S&P 500) was accompanied by very good market breadth (the number of stocks advancing relative to the number declining). This indicates a broad-based uptrend with most stocks and sectors participating.

Fourth, the advance-decline line and the advance-decline volume line both made distinct new highs for the year thus validating the new medium-term uptrend.

Fifth, two important indicators fell in line with the message of a new medium-term up trend: The 200-day moving average (MA200) changed course and started to rise. And the 50-day exponential moving average (EMA50) crossed the 200-day exponential moving average.

Sixth, longer-term sentiment indicators show that this rally is greeted by remarkable skepticism. Bull markets climb the proverbial wall of worry. This wall seems to be in a healthy condition.

What This Means For You …

Look at market drops as buying opportunities.
Look at market drops as buying opportunities.

History shows that financial markets move in prolonged trends and can ignore fundamentals for a long time. And now the technical pictures of stock markets all over the world clearly show medium-term bullish patterns. They indicate a nascent uptrend and are usually followed by further gains.

In hindsight, technical indicators are telling us that a medium-term bull market had started at the March lows. So from now on, bull market rules apply. And the most important rule is: In bull markets, corrections are buying opportunities.

Best wishes,

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit .

Money and Markets Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


04 Sep 09, 15:56
Talk about capitulation!

Talk about capitulation! Contrast this with what the author wrote in February...

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules