Top flight technician Mary Ann Bartels (BofA/ML) comments on the one-year anniversary of the Golden Cross, and the â??Dark Crossâ? â?? its evil twin â?? that is now upon us:
June 23, 2010 marked the 1-year anniversary of last June's bullish Golden Cross of the 50-day moving average above the 200-day moving average. This Golden Cross signal preceded a 12-month return of 22.4% on the S&P 500. The average 12-month return for the 42 Golden Crosses that have occurred since 1928 is 9.6%. More importantly, the June 23, 2009 signal occurred during the NBER recession that began in December 2007 and Golden Crosses associated with recessions show a much stronger average 12-month return of 19.5%. The average 12-month return for the S&P 500 over the same period is 7.2%.[...]
The bearish counterpart of the Golden Cross is called a Dark Cross. This signal occurs when the 50-day moving average crosses below the 200-day moving average. For the S&P 500, Dark Crosses are not all that bearish. The 42 Dark Cross signals that have occurred since 1928 have generated an average 12-month return of 2.4% for the S&P 500 vs. the average S&P 12-month return of 7.2%.[...]
She concludes with this rather ominous observation:
The current trading range on the S&P 500, which began in 2000, has seen two of these more bearish signals "â?? one in 2000 and the other in 2007.
~~~
BR here â?? I whipped up this chart of the NYSE using the 50 and 200 day moving averages
So it has been deflation all alongâ?¦hmmm? The dollar is your friend here, unless you think the country is going out of business.
SDS and TWM are money in the bank guys. I donâ??t want to come of all Steve Barry on you (as we all know he held onto that QID trade way too long), but I think we are headed back below 7,600 and this will be an opportunity to make money on the down leg and then when it shoots back up (for no good reason) like it did last time.
Did you guys see Hussman? How about Rosenberg? Arenâ??t they both extremely bearish as well?
@Justin â?? please define â??going out of businessâ?
@Cdale_dog
I would agree on the direction, but doubt that it will be in a single movement. Dunno how hard things will hit us over the summer, but Iâ??m sure that Bernanke still has a few tricks up his sleeve (although I think Geithner is polishing his resume, and looking for banksters to hire him at this point).
Iâ??m hoping for more like a nice 20% gain on my TZA shares, thinking that small stocks are going to be hit harder than most on any hint of a double-dip, and look to be immune from the intervention/manipulation that the financials are subject to.
â??Did you guys see Hussman?â? â??Extremely Bearish?â?
Have you guys seen Hussmanâ??s performance for Strategic Growth? See the below from his website: Annualized Total Returns as of 5/31/10 1 Year 2.38% 3 Year 1.00%
If my client return was as mediocre as Hussman I would expect to lose a lot, a whole lot, of clients. I donâ??t care if the only non-sensical cause for market advance in 2009 was that Ben Bernanke got out of the car and pushed. How can you justify a 2.38% return. The LQD was up over 15% and the SPX was up over 30%. OK, the professor knows all the reasons to be bearish, where was the May 2007 to May 2009 performance â?? he should have been up over 40% if he cold spell the word SHORT.
You frosty perma bears have got to worship at the feet of a new Dr. Doom, Hussman has a big problem called published performance and his performance stinks.
It seems unlikely that any big plunge will begin before the end of the quarter, unless the banksters are heavily shorting the markets, which does not seem to be the case at this point â?¦ next week may be an entirely different story.
It sure looks like we are headed down. One idea when you consider how Mr. Market rips your heart out, is that we see a long, gradual downtrend. People will wait to pounce once the market gets in the 800â??s or lower, remembering last yearâ??s rally. Once we get below 800 and then maybe under 700 people start buying big. This is because they donâ??t want to miss out like they may have in the spring of 2009 when they didnâ??t buy. This time they buy, but only to find out that Mr. Market doesnâ??t shoot back up but stays down and drags perhaps just bouncing around there or maybe even lower. Then after a while, impatient people get disgusted and bail out. Thatâ??s when â??revulsionâ? finally comes. (stealing a word from Hussman). We really didnâ??t get revulsion last time. It takes time to get revulsion and to get to the point where people hate stocks. Then it will be time to buy.
Correction: the SPX was up only 20% 5/31 to 5/31.
I get irritated when mutual fund wholesalers talk that bull about if you miss the best ten days of the year your return is almost zero, Butâ?¦ If Hussman misses the best ten months of a cycle how can his results be any good? And the ten best months that it appears he missed are the five best months up and the five best months short.
@Rescission
Perhaps without knowing it, you have almost perfectly articulated Bob Farrellâ??s Rule #8:
Bear markets have three stages "â? sharp down "â? reflexive rebound "â?a drawn-out fundamental downtrend.
We have seen Stage 1 and Stage 2â?¦are we now in the fairly early stages of Stage 3?
I believe itâ??s called a â??Death Crossâ?. Iâ??ve never heard it called a â??darkâ? cross. Golden Cross and Death Cross.
- http://www.tradingday.com/c/tatuto/movingaveragecrossovers.html - http://investinganswers.com/education/principles-technical-analysis-death-cross-golden-cross-1402
@Cynic
Not to defend the Good Doctor, as there are certainly many funds in different categories (and even within the category that the Hussman Strategic Growth fund resides) that have outperformed him, but his fund performance numbers are in the upper part of that category for the 3-year period, according to Morningstar (5/31/2010):
HSGFX 0.97% (23rd in category) vs -4.04% for the category average
â?¦ the 1-year, was not so good â?¦ as one would expect from a predominantly bearish stance in the face of a rip-roaring rally â?¦
HSGFX 2.75% (55th in category) vs 4.21% for the category average
In the YTD, 3 month, 1 month, 1 week intervals, his fund did a lot better, ranking within the top 10 in category for each of those intervals, and topping the category in the 3-month performance. In every one of those intervals the category average was negative, while the HSGFX return was positive in each of the same intervals.
Yes, there are certainly a LOT of funds of different types that have done better, and even funds of the same type that have done better, but if your objective was to not lose money, Dr Hussman appears to be doing OK.
His fund performance may well â??stinkâ?, but within the category that that particular fund resides, it stinks a whole lot less than its peers. There is a certain attraction to a significant segment of investors in avoiding negative returns.
@Cynic_FA:
You canâ??t fault Hussman, without being dishonest, for something he doesnâ??t intend to achieve and doesnâ??t promise. You are obviously in for the speculative short-term gain, which clearly can be seen from that you take the returns from riding on a huge bear market rally as a measure for a good or bad â??performanceâ?. Hussmanâ??s explicitly says his funds are for investors who want to see long term performance together with capital preservation. I think, considering that the S&P500 has had a negative return over the last 10 years, Hussman has been doing quite well compared to this and he has achieved what he wanted to achieve. Nothing is perfect, though. If you donâ??t pursue the investment goals offered by Hussman, if you want riskier short-term investments instead, donâ??t chose his funds. Itâ??s as simple as this.
Just compare the performance you have to offer to your clients with the performance of Hussmanâ??s funds in a few years again, and not just after a temporary bear market rally. Then we will see whether you are a good market timer. Although you can claim a lot here, no one can check whether you are telling the truth anyway.
We are nearing a 15% correction from the highs. There is way too much â??double dipâ? chatter for it to happen IMHO. High yield bonds and bond funds are holding up well, that is not indicative of market under collapse.
I think there will be a buying opportunity shortly (1-2 months), and we may get a secondary stimulus that boosts markets. Benny boy is in so deep, he will not want to fail. Congress can shoot down all the pork barrels they want, the FED will just catapult the money over the Castle walls.
Ten percent unemployment? Gusher in the Gulf? Housing rolling over? Asian carp invading Great Lakes? Afghan War in disarray? Europe teetering on collapse? Not to worry: CONSUMER CONFIDENCE JUST HIT A TWO-YEAR HIGH!
http://www.businessweek.com/news/2010-06-25/u-s-economy-consumer-confidence-hits-two-year-high.html
@Cynic_FA:
he should have been up over 40% if he cold spell the word SHORT.
Well, have you shorted the market a lot recently? Because I donâ??t think so considering the bullishness you present here.
I wonder why she has neglected the â??dark crossâ? that occurred in September 2004 in the aftermath of a mild, March-August correction. The market gained 50% over the next three years to the October 2007 top.
If you look back, every bull market since 1949 has had (1) a â??golden crossâ? to confirm the start of the new bull market, (2) an initial â??dark crossâ? during a corrective phase, followed by (3) a second â??golden crossâ? confirming the second leg which, incidentally, has always exceeded the high of the first leg, and (4) a second â??dark crossâ? confirming a new bear market.
The 2000 and 2007 crosses that she references were (4)â??s and confirmed new bear markets. The September 2004 dark cross and the one that is occurring now are (2)â??s, which for 60 years and 13 bull/bear cycles have marked the end of 10%-15% corrections.
If the pattern is to blow up this time, we should know shortly. None of the corrections associated with dark crosses have exceeded 16%, which means the S&P should hold above 1025. If precedent holds, the downside from the current 1045 is 2% while the upside is at least 20%.
Read Full Article »