The market has been in what everyone seems to agree is a secular bear market. That is a long-term sideways market with periodic cyclical bull markets that take it back to previous peaks only to have a cyclical bear market take it back down again.
So far since the peak in 2000 we’ve seen two cyclical bear markets.
You only hear about the secular bear market when a cyclical bear market is underway and has fear rising, but not so much when a cyclical bull market is underway, and especially in the excitement when it returns to previous peaks.
So let’s have a look at the market in the context of the secular bear and whether it is ending.
Because here we are with the S&P 500 back to its previous peaks. Its peak in 2007 exceeded its peak in 2000 by a fraction. And its peak in 2013 is now exceeding its peak of 2007 by a fraction.
So the big question of course is whether this is a break out that marks the end of the secular bear market. Because when the market pulls out of secular bear markets and into secular bull markets the gains over the following 20 years have always been spectacular.
Or are we just at another peak that will see the secular bear continue as in 1966-1982, and 1901-1921?
Which way will oil break out?
We’ve been advising keeping an eye on the direction of commodities and oil prices, since they are harbingers for the direction of the economy, and probably therefore the stock market.
Oil has been locked in a symmetrical triangle formation for more than two years. As I noted previously with bonds and gold, the direction of a market’s breakout from such a pattern usually indicates its next direction for awhile.
So far every time oil looks ready to break to the upside it gets only as far as the upper limit of the formation and plunges again. And each time it plunges it creates concerns in the media that the bottom will drop out. But it only gets to the lower limit of the pattern again and begins another rally attempt.
But with each move the triangle is tightening and the break out of it in one direction or the other will have to take place.
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About The Author
Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!
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