Are we in a bull market as the author DeBuse suggests? If so, what phase of the bull market are we in? The first part of the questions seems rhetorical, as, at least to my thinking, we have been in a bull market since March of 2009, but, hey, that’s just me. I tend to see things more simply than those who need to quantify and qualify. No matter, though, as today I am going deeper into “the anatomy of a bull market.”
Period One
“The first period of a bull market is marked by little, if any public confidence and quite accumulation by professionals.” It is true that back in October, the public showed little confidence in the economy, and it is true that last fall, professional money managers began accumulating positions in the market. I don’t know if “quiet” defines that accumulation, but, certainly it was steady and orderly.
In this period, “the average price is low and even the good stocks are cheap … the price/earnings (P/E) ratios of the indexes are low … a few strong stocks now begin to break out … prices begin crossing their 100-day moving average … on average the price action is dull and the volume is low.”
So, one year ago today, the DJIA P/E was 15.34; today it is 14.56. The Nasdaq Composite was 45.06; today it is 12.34. The S&P 500 was 72.86; today it is 17.31. I assume DeBuse looked at these numbers toward the end of October. Some of the big names did begin to move in late October and November, and, as to prices crossing their 100-day moving averages, a quick check of IBM and Verizon shows this actually happened for both much earlier than October, and both have since crossed that barrier many times since, as their 100-day moving average climbed. One cannot argue that price action was dull and volume was light then (although the past few months have seen even lighter volume.).
One point here is that ascertaining a beginning for a bull market is both difficult and artful, as DeBuse has stated. A larger point, however, is this – if one had waited until late October 2009 to begin investing, based on waiting for “signs” of a new bull market, one would have missed the upticks of March, April, May, June, July, August, and September. IBM, for example, sat at $87, give or take in March, and by mid of October it had risen to $127, give or take.
As I said yesterday, the article is enlightening, but, when I am done with this “review,” what we learn might not be what DeBuse intended his audience to see when he wrote the article. On Monday, I will dig deeper into “the anatomy of a bull market,” and, although different from the intentions of DeBuse, I will lay out more of what I gleaned from reading the article. As I have said many times, education is about more than just taking in information. It is about analyzing what is said, how it is presented, and drawing conclusions that just might differ from the conclusions drawn in the original source.
Trade in the day; invest in your life …
