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Jeffrey D. Medwin

Is a BEAR Market for Stocks Continuing ?

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If Powell farts to the right the market goes down. If he farts to the left the market goes up.

JJK

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Run'em, gun'em, and dump'em.  The rest got whipsawed.

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Screen shot of the S&P500 ETF    SPY June 11, 2020 Close

 

Anyone care to comment on the price action?

(The gray shaded areas are extended/after hours trading)

 

 

ThinkorSwim 6-11-2020 5-28-17 PM.jpg

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4 minutes ago, artto said:

Anyone care to comment on the price action?

Volume-wise, it looks like the masses hung on throughout a dropping day and panicked right before the close.

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55 minutes ago, Jeff Matthews said:

Volume-wise, it looks like the masses hung on throughout a dropping day and panicked right before the close.

 

Could be, but I doubt that's the reason.

 

Why?

 

Because that kind of Volume action is seen at the end of every day. That's when all the Funds balance out their accounts to "match" up with what the indexes have done during the day. There's typically an end-of-day surge in Volume.

 

Mainly, in the SPY screen shot, I was referring to the unusual price action right after market close, and the "up-strikes" in price the previous night - up to the same price level - after market Close.

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55 minutes ago, Jeff Matthews said:

Volume-wise, it looks like the masses hung on throughout a dropping day and panicked right before the close.

According to my Schwab online info those big trades are regulated by the SEC to occur at the final minutes of the day to not disrupt the market.

JJK

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Here's a thought to mull over....

 

This morning, I was at the dentist for my checkup.  While the gal was doing her thing (cleaning) she was doing all the talking because I had the scraper & suction thingy in my mouth.

 

My take on what she said was they saw/read/were told about a study that said the Dentists' office is a good leading indicator of the economy.

 

I'm thinking, ok....  and how??

 

She went on to say that the Dentist is considered an optional place to go (absent a tooth ache)...but for normal care/cleaning, it's one place that can be moved out further.  So, if someone is laid off, has lost insurance...  the dental visit is one of the first places to feel the lag.

 

Interesting I thought....

 

then she said they are absolutely slammed with business right now and are booked for about the next 8 months solid.  This is "normal" visits and trying to catch up with the visits that were missed during their (she said 8-week) shutdown....yikes

 

So if that's as valid of an indicator as she suggested they were told.....  seems things are going to be fine and the sky isn't falling after all.

 

Fine if you want to disagree....  just don't shoot the messenger.

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1 hour ago, Coytee said:

Here's a thought to mull over....

 

This morning, I was at the dentist for my checkup.  While the gal was doing her thing (cleaning) she was doing all the talking because I had the scraper & suction thingy in my mouth.

 

My take on what she said was they saw/read/were told about a study that said the Dentists' office is a good leading indicator of the economy.

 

I'm thinking, ok....  and how??

 

She went on to say that the Dentist is considered an optional place to go (absent a tooth ache)...but for normal care/cleaning, it's one place that can be moved out further.  So, if someone is laid off, has lost insurance...  the dental visit is one of the first places to feel the lag.

 

Interesting I thought....

 

then she said they are absolutely slammed with business right now and are booked for about the next 8 months solid.  This is "normal" visits and trying to catch up with the visits that were missed during their (she said 8-week) shutdown....yikes

 

So if that's as valid of an indicator as she suggested they were told.....  seems things are going to be fine and the sky isn't falling after all.

 

Fine if you want to disagree....  just don't shoot the messenger.

There are two problems I see with that “argument”.

 

First is that the dental hygienist “claims” that they are “booked for about the next 8 months solid. This is ‘normal’ visits and trying to catch up with the visits that were missed during the 8 week shutdown.”

 

OK. 8 week shutdown now = 8 months solid appointments to “catch up” (?)

 

The numbers do not add up.

 

Second, I would like to know the source of her documentation. Is this just someone’s opinion? Or do they have actual historical documentation to back up this statement?

 

As a contrarian argument, I have to wonder if the increase in dental bookings is more the result of a similar situation I’m in. Wife still has job. Job has health insurance, with dental (& eye) coverage. I too am thinking, gee, I’d better get this stuff done while we still have insurance.

 

So, it may not be a leading indicator as we usually think of. It just might be that once the dental offices opened back up, more people than usual, who still have paid jobs – and insurance – figure they better get this done while they still have a job - and insurance.

 

EDIT: or getting dental work done while they can - before a second wave of virus closes things down again.

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Your dental hygienist may have seen or is indirectly referring to this article. However, if she had read the whole thing, may have reached a different conclusion.

 

The dental thing could simply be the "rush" before the storm. Just sayin'.

 

https://www.nytimes.com/2020/06/10/upshot/dentists-coronavirus-economic-indicator.html

 

Today's rally is quickly fading.

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On 6/7/2020 at 6:27 AM, Jeffrey D. Medwin said:

 

 

Art, I am too busy building a new tube preamplifier now. Can you ( OR SOMEONE ELSE ) research the number of days of the 1929 snap - back rally, and compare them to 2020 for us all??  That would be interesting to note, to know, and it would be appreciated .

 

 

 

Jeff Medwin 

 

I have that data, as well as comparisons to all other similar events since 1929, comparing those to our most recent covid event but I'll have to look it up. Maybe this weekend.

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On 6/7/2020 at 6:27 AM, Jeffrey D. Medwin said:

There are a three things I would like to state now, in this thread, about the subject of Bear Markets, continuing or not :

 

ONE Only in 1929, and in 2020, did we start a bear market with a price GAP down, on the DJIA charts,  off the top.  In 1929, it took about 25 years for the price gap to get filled.   As of today, this gap down on the charts, in the major averages, remains UNFILLED. 

 

It wasn't until many of the men committed suicide, and the widows held on to the certificates, much much later, that people got "even ". 

 

TWO : In 2020, other than a day or two of panic selling, we have had NO Bear Market capitulation bottom.  If you check and compare volume of shares traded, at the lows in 2020 VS, say the 2008 decline, we see a PITIFUL decline in 2020's actual volume of shares traded at the March lows, versus a Bear Market capitulation bottom.

 

THREE :  After the initial drop, Bear markets always have some sort of brief " snap back" rally, very often violently up, and lasting just several days.    There is ONE exception, 1929, which had the LONGEST snap back rally ever recorded ( several months ).  It was not until that snap back rally ended, that the MAJOR damage to stock prices occurred, drawn-out over a few years, until the market bottomed, 84 percent lower than the peak.

 

I think we all realize, this rally off the March 2020 lows has been a substantial and long one !!!   VERY much unlike all prior Bear Market rallies, except ......for one  notable exception....1929.

 

Art, I am too busy building a new tube preamplifier now. Can you ( OR SOMEONE ELSE ) research the number of days of the 1929 snap - back rally, and compare them to 2020 for us all??  That would be interesting to note, to know, and it would be appreciated .

 

We are, ( on the " Wall Street Cheat Sheet Market Psychology chart " ), squarely in the " Complacency " phase, after the initial drop.....

 

............................" De fat lady ain't sung yet "

 

Will the biggest Bull Market in history ...................end with the biggest Bear Market in history ??

 

As per Forum policy, none of what I post should be considered investment advice.  This is only some personal observations being made, things I now think about.

 

Jeff Medwin 

 

Now for the rebuttal. 🙃

 

ONE Only in 1929, and in 2020, did we start a bear market with a price GAP down, on the DJIA charts,  off the top.  In 1929, it took about 25 years for the price gap to get filled.   As of today, this gap down on the charts, in the major averages, remains UNFILLED.

 

First of all you are stating that we are in a bear market. That is debatable. Maybe according to your model we are. Maybe according to some other models we are. Some models however, especially longer-term models, have not triggered a Sell Signal. I know, hard to believe, but that’s the truth.

 

Therefore, the statement Only in 1929, and in 2020, did we start a bear market with a price GAP down, on the DJIA charts is simply an opinion. Hindsight is always 20/20 vision. Right now, we’re really not far enough along in this situation to declare this a Bear Market, at least not by my definition……………

 

There are secular Bear/Bull Markets. And there cyclical Bear/Bull markets/trends WITHIN the longer-term SECULAR trends. Enough time hasn’t passed, nor have the technical conditions occurred to declare this a new SECULAR Bear Market, at least not by the definitions and models I use.

 

The other problem here is the “Gap Down” part. Two occurrences, if we include the current one (even though this may still only be a cyclical bear within a longer-term bull – jury not in yet). A sample size of 2 have little statistical significance. Pretty much a coin flip.

 

 

TWO : In 2020, other than a day or two of panic selling, we have had NO Bear Market capitulation bottom.  If you check and compare volume of shares traded, at the lows in 2020 VS, say the 2008 decline, we see a PITIFUL decline in 2020's actual volume of shares traded at the March lows, versus a Bear Market capitulation bottom.

 

I don’t know what data source you use. I use Reuters DataLink via Metastock.

 

According to that data, the highest (down) Volume in the 2020 crash was 915,988,992 shares on February 28.  March 12 saw 908,255,424 shares. March 23 bottom  787,971,968.

 

In 2009, March 9 bottom DJIA Volume was 365,989,280 shares

The highest down Volume during the financial crisis prior to the March 9 bottom was around 650M to 675M shares in September & October 2008. Even if we use a 50 or 100 day moving average of Volume, recent volume is still about 25% higher than 09'.

 

The DJIA Volume during the recent crash is clearly much higher than it was in 2009. Therefore the statement “we see a PITIFUL decline in 2020's actual volume of shares traded at the March lows, versus a Bear Market capitulation bottom.” is simply not true.

 

 

THREE :  After the initial drop, Bear markets always have some sort of brief " snap back" rally, very often violently up, and lasting just several days.    There is ONE exception, 1929, which had the LONGEST snap back rally ever recorded ( several months ).  It was not until that snap back rally ended, that the MAJOR damage to stock prices occurred, drawn-out over a few years, until the market bottomed, 84 percent lower than the peak

 

I guess I’ll have to disagree again. Please show me where the brief “snap back” rally is on this chart from the March 2009 bottom.

After the March 9, 09 bottom, the DJIA basically continued up with just a few brief one or two day pull backs until June 11 at which point there was a slight pullback for a month and then continued on its way up.

 

I’m not saying that we’re not going down lower in the short term. That is a distinct possibility. Especially if reopening the economy results increasing spread of the virus again. But longer term (12 months), everything I’ve looked at points to higher market returns.

 

DJIA March 2009.jpg

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@Jeffrey D. Medwin 

 

Help me understand why TVIX is getting delisted. How does it work if you are currently holding shares of it? What happens between now and the time those 9 get delisted.

 

https://www.prnewswire.com/news-releases/credit-suisse-ag-announces-its-intent-to-delist-and-suspend-further-issuances-of-its-velocityshares-etns-301080971.html

 

 

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...because they know they will have to pay out bigtime real soon and they don't have the reserves to cover it?

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1 hour ago, geoff. said:

...because they know they will have to pay out bigtime real soon and they don't have the reserves to cover it?

As long as we're speculating, my guess is TVIX is not profitable to them.  Since it has an eroding value built into it, I wonder if being delisted will speed up that process significantly.

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But it can't just go to nothing can it? I'm curious about the mechanics of how it works. If it works such that the owner of the fund/etf decides they don't want to play anymore they simply can't say it is worth nothing. Don't they have to buy back all outstanding shares? If that were so and we knew it wouldn't the street just keep buying until that day to inflate the price?

 

I get when GM went out of business if you had shares they were worth nothing, but GM effectively went out of business. New company new shares, old shares worthless.

 

1 hour ago, geoff. said:

...because they know they will have to pay out bigtime real soon and they don't have the reserves to cover it?

 

 

If that were the case and a index fund for the S&P 500 went up quickly like the end of 19 beginning of 20 the fund company, say MFS can't just say sorry we are closing our doors....can they? From what I read it sounded like Credit Suise <sp> was deciding not to play. I didn't feel like the actual exchange they are traded on said we don't think you are worthy like sometimes happens to a shrinking company.

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Read your own link. (again)  Plus, these are ETN's, not ETF's.  Think of it as a note that can be called by the bank.  Also, Jeff is on the right track that a lack of liquidity will reduce the value, just as with any instrument that is illiquid.  No, they won't be worthless necessarily, they will be worth what the market such as it will be will bear.  Yes, they are deciding not to play, and the contract clearly states what they can and can't do.  Once more, and Artto pointed this out earlier, these are ETN not ETF.  Your analogy to an index fund is incorrect, similar to calling a Koala a bear.  It is not a bear, it is a marsupial.  Run a search for the difference between an ETF and an ETN.

To not play anymore requires an announcement so that prior to cessation the market is informed of what the future of these instruments will be.  Basically, buy at your own risk, we have warned you about upcoming liquidity issues because of delisting, and we may call the note (accelerate) at our whim.

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Still thinking double bottom between Q2 earnings reports and election day. Probably August 2020. Discretionary spending is going to publish unprecedented losses. Apologies for the cynicism.

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