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
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
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
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 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
ARE YOU LOVING YOUR SERVITUDE? - 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

Stock Market Crash 2008 Gives Birth to Baby Bull 2009

Stock-Markets / Stocks Bull Market Jan 04, 2009 - 07:25 PM GMT

By: Clif_Droke

Stock-Markets

Best Financial Markets Analysis ArticleThe old man of 2008 has yielded his place to the baby New Year and with it a changing of the guard. Not only has 2009 brought a fresh new start with a clean slate, but also a new series of Kress cycles.

The previous year was dominated by every conceivable nightmare in the financial realm. From housing market woes to bank collapses, from soaring fuel costs to collapsing equity prices -- in 2008 we saw the extremities of price inflation give way to deflationary collapse, all within the space of a few short months. Truly the financial market turmoil of the past year was head-spinning.


The seismic volatility of 2008 was a testament to the power of the Kress cycles, for in 2008 the Kress cycles were in the worst possible configuration. The 6-year cycle was bottoming while the 12-year cycle was peaking. This produced much of the volatility and cross-currents of the past year, particularly between the months of June and November.

With the advent of the New Year, the financial market has the benefit of a positive Kress cycle configuration behind it. Instead of serving as detrimental cross currents, the cycles will be as beneficial tail winds to the stock market in the coming months. The Kress 6-year cycle is now on the rise and exerting increasing strength with each passing week. Instead of a depressing influence as was the case in 2008, the 6-year cycle will have an uplifting effect in the months ahead. Providing additional strength will be the 10-year cycle, which is peaking later this summer.

With the 6-year cycle bottom and the recently bottomed composite interim cycle behind us, another thing investors can look forward to in 2009 is diminished volatility. One of the prime contributors to the hyper volatility of 2008 was the dual between the bottoming 6-year cycle and the peaking 12-year cycle. Now that this event has passed we can already see market volatility is on the wane. The Volatility Index (VIX) recently broke under its 60-day moving average and is also below the psychological 50.00 level, a proverbial “line in the sand” delineating the control of the stock market between the buyers and sellers. With the VIX now under 50.00, the sellers have lost the advantage they formerly held.

Another welcome change in 2009 is the return of the market’s “Wall of Worry.” During the second half of 2008 the market fed off the near continuous stream of bad news. Since the Kress cycles were down hard in 2008, bad news generated a depressing effect on stock prices. Now that the Kress cycles are turning up it means that from here on the contrarian principle will work once again. This means that bad news is good news for the bull market. And good news is also good news. The market’s “Slope of Hope” which reigned supreme in the bear market will now be replaced by the “Wall of Worry” now that a new cyclical bull market is underway.

The contrarian principle worked exceptionally well in 2003-2007. It even worked fairly well during the first half of 2008 before the final “hard down” phase of the 6-year cycle and when some of the interim cycles were still peaking. Yet from June through November, if you were a died-in-the-wool contrarian you would have lost money by betting against the bearish crowd. Why is this? Because in the final phase of a bear market when the cycles are synchronized on the downside, and internal momentum is declining to boot, then bad news tends to feed on itself. Instead of the market reversing on a manifestation of negative sentiment and bad news headlines, it falls all the more. This is why it’s important to adjust our investment posture to stay in line with the cycles.

Our in-house investor sentiment gauge is updated weekly. Notice in the following graph that each time in the last two years the indicator fell to -10 or below marked a good time to buy stocks. The times this happened were: July 3, 2007; Jan. 23, 2008, Mar. 12-18, 2008, April 2, 2008, Dec. 31, 2008.

Speaking of sentiment, in the business section of my local newspaper something caught my attention the other day. It was in a financial advice question and answer by Bruce Williams, who writes the nationally syndicated “Smart Money” column. The questioner asked him, “What can we do to prepare for the impending depression? Should we take money out of savings? Pay off credit cards? Start a garden?”

Never mind Mr. Williams’ answer. The question is what really matters for purposes of this discussion. Now keep in mind that this column is read by hundreds of thousands across the country and in some of the biggest metropolitan newspapers as well as smaller ones. This question is reflective of the public’s mindset right now.

If this question had been published in a financial advice column anytime before 2008 we could automatically assume it was being asked by a “permanent pessimist” type of investor. There is no way your average mainstream investor (who tends to be eternally optimistic) would have asked this sort of question before the 2008 financial crisis, or at least, such a question would never have been be publicized in mainstream newspapers before this year. This gives us a very good idea of just how gloomy the average American is feeling right now. They are depressed, despondent, forlorn, forsaken, and just about every other negative description you’d care to throw in. The bottom line is that depression is now being treated by the mainstream as inevitable instead of merely a remote possibility as it had been before this year.

Even the books shelves of mainstream books stores are swelling with titles evoking the “coming depression” and “financial collapse” being predicted for 2009. Quite a few financial heavy hitters, including some who were noted for being super bullish in former years, have come out with books predicting depression in the past few months. The depression trade has come full circle from being a small cottage industry dominated by a handful of permanent pessimists, to a major business where even well-known mainstream financial pundits have jumped on the bandwagon.

This is earth-shattering in its implication and speaks volumes about the current investor sentiment out there. Viewed from a contrarian’s perspective, and with the Kress cycles firmly to our backs, the odds say the pessimism of the majority will be disappointed in the coming months. Or, as Joe Granville reminds us, “The obvious is obviously wrong.” This statement especially holds true when the cyclical winds are blowing against the grain of conventional wisdom, as they are now.

Every market signal is telling us that the U.S. will probably avoid depression in 2009. Calls for financial Armageddon will have to be postponed for another time. If investors want to make money in the financial marketplace of the opening months of 2009 they will have to discard their bearish hangover mentality from 2008, for it won’t serve them well from here. Maintaining a bearish posture heading into 2009 is like wearing a fur coat on the Fourth of July: it just isn’t suitable to the climate of the times.

The mini cyclical bull market now underway has the potential to last until summer, when the 10-year cycle is scheduled to peak. While it may not be a spectacular bull market it should nonetheless offer a much needed respite from the previous year’s pain.

By Clif Droke
www.clifdroke.com

Clif Droke is the editor of the daily Gold & Silver Stock Report. Published daily since 2002, the report provides forecasts and analysis of the leading gold, silver, uranium and energy stocks from a short-term technical standpoint. He is also the author of numerous books, including 'How to Read Chart Patterns for Greater Profits.' For more information visit www.clifdroke.com

Clif Droke Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

WN
05 Jan 09, 16:45
e: Stock Market Crash 2008 Gives Birth to Baby Bull 2009

Looks to me like the VIX is getting ready for another stock market shalacking. Not sure who Kress is but you are going to have to do better than that to convince me we are going into a bull market.


TV
27 Mar 09, 11:34
When did Kress cycle start?

In fact, when did all cycles starts. If these cycles are so correct in time, somebody... no, sorry, everybody... would have nailed the market movement to the day.

All theories are good until they are not good anymore.


Post Comment

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

6 Critical Money Making Rules