Current observations from Mount Nebo
9/1/2010
by Robert Hitt
What does a dead market look like?
We have some recent examples to consider.
Nikkei for the last 10 or more years
Gold at 250 silver at 3
Tech stocks post 2002
and soon to a 401K near you?? ... drum roll... The western world equity market will be dead
Markets run in phases.. lucid ... psycho .. and
then dead.
This is seen easily in major market moves in the long cycle but also
translates into more minor sub cycles if one has eyes to see it.
LUCID.. a traders dream market.. most methods that have good risk parameters work.. when a lucid market climax occurs even the dumbest methods are making money. In spite of the bear market I see the 2000- 2007 period as still very lucid.. The psycho phase began in my opin in February of 2007..
PSYCHO one at a time all methods that have worked begin to fail.. Astro flips to inverted a lot. bad is good down is up and who the F knows what to make of things.. Everyone starts to generate losses until it reaches a crescendo. even the smartest are losing money. this was the condition we have been seeing and the increase in erratic reactions is due to the increasing medication of HOPEIUM coming out of DC.. The doses have to be constantly increased and this brings a point where an overdose of hopeium meets up with the laws of nature called truth always wins and opps ... call in the medics the patient is choking on his own vomit.. do we have a pulse? This is a time when wars tend to happen.. Dr strangelove sees that if hopeium is not working below lethal doses maybe abject fear from crackupium will revive the patient. maybe the final stage of psycho is a lot like creation of a walking dead zombie. I am seeing a lot of vampire interest in mass media so this stage is rather near term I think.
DEAD.. no one wants to even discuss whatever it is.. disgust runs rampant. no one is willing to even play. the landscape is littered with stinking road kill. There are bargains everywhere BUT they are long term and the time horizon for holding positions is in years and decades and not in days.. we can look at 1942 as the last major degree shift out of max dead. the best example is a long term investment of 10K in1942 Dow Jones at 100 was worth many millions by 1962 at 1000..
KEEP IN MIND.. the max print lows usually come when the market is still a bit lucid. 1932 low was lower than the 1942 low.
Once a market is dead it can take a while to "recover" and that only happens when everyone who was damaged by the Psycho stage retires and a new crop of players enters.. The only way to draw serious interest from a new generation is when things begin to make sense again. unfortunately this new blood is not likely to be seen any time soon. I would NOT be in any rush to place any buy and hold money at risk any time soon. Until the OBVIOUS is seen a nibble and run approach is playing the game with with psychos the only way that has a chance of preserving capital.
We are a not very far way from dead as of now and the arrival at that condition depends on?? The PSYCHOS pushing everything to beyond a breaking point.. .. LOLOL.. And maybe you think that happened already but we can tell as of now because the same tricks still prevail. when the market is really dead then it will be a subject that is too unpopular to even bring up in a conversation.
So the dead as a doornail moment for equity markets is out there and it a matter of recognizing it when it happens. For the foreseeable future we deal with the psycho going into zombie.