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When Will the Next Cyclical Bull Commence?

Rating: 2 votes, 5.00 average.
If the bears could have taken it down past 740, then why didn't it happen yesterday or today?

There are so many people who are still fighting the last war here. My cousin is buying a house here soon and he's going to get a $7500 tax rebate. Guys, this is like buying a house and not having to pay for closing costs. He's going to use that 'rebate' money to put a on a new roof, water heater and windows in the house (windows and water heaters also bring a tax rebate).

The volume was shoddy the past two days for the breaches of major tech levels we've witnessed. PPT? Come on. This whole entire market has been moved by program traders since October, and lately the ones who are playing for that downside protection have been paying some buku premiums.

Let me pose this question: Has a plunge in financials become too obvious? By looking around at the lust and desire these days to own a short financials ETF, I know what my answer is. Look at gold and precious metals. Obviously a few people haven't bought the idea of deflation since October yet there is still a consensus out there that believes we're in for mass deflation. Most financial stocks have been blasted with some bank type ETF's already being down at least around 70% plus in the past year and a half. It's time to start looking at other opportunities within the forest here. The banks are already nationalized, get over it.

So much of the trading happening lately has reminded me of a conversation I had with a co-worker who claimed to have made some 40% in 2006 using the I Fund. He said he'd buy on a down day, hold 2 days, then sell. Repeat the next down day. It was foolproof, at least in the short run. Most major drops have received at least a short term reprieve during this market crash, yet the market failed to bounce yesterday and today. Of course, we could classify any bounce as a mere case of randomness, short covering, or data mined statistics. The fact of the matter is, it didn't work this week like it has the past 12 months. The same goes for simply buying and selling off the nightly news or newspaper headlines. There's no way it's going to last forever.

Yes, we're in a secular bear market, but that doesn't mean we aren't going to have violent cyclical rallies every now and then. Example: The US Dollar rally that began after the base from March-July 2008. The stimulus waiting to be injected into the system is extraordinary and even though it's not happening tomorrow, I hear the market is a forward looking discount mechanism.

I just saw a headline at the WSJ say "Dow Closes at Nadir Led by Financials". Financials- rear view mirror.

Commodity type stocks have continued their outperformace without help from financials. With that, I still believe we are going to have a huge rally in equities soon here, similar to that of gold's recent run and that of the US dollar in 2008.

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Updated 02-19-2009 at 04:48 PM by Bullitt



  1. tsptalk's Avatar
    Good points to consider. thanks!
  2. Rogue's Avatar
    In English, you're saying "buy low," right?.
  3. Bullitt's Avatar
    You can buy high and sell higher, that works just as good. There are opportunities out there, and commodities continue to lead the outperformance charge according to IBD. The initial leaders tend to outperform when the next cyclical bulls begin.

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