THE OUTSIZED FOCUS LAST WEEK ON THE DOW'S REACHING "official" bear-market status with a 20% decline from a recent high is a bit like fixating on the moment that storm winds go from 73 to 74 miles per hour to formally become a hurricane.He also mentioned that oil was up 25% since May 1. I hadn't thought of it in those terms but anyone's perception of fundamentals notwithstanding, 25% in two months creates a meaningful headwind for further price rises in the near term.
In an environment like this that headwind could be overcome to be sure but with energy now 16% of the S&P 500 an equalweight position takes on a little more risk for downside volatility than some folks may realize.
6 comments:
I guess the headlines are just that - intended to use the term 'Officially a Bear Market' to grab your attention if it isn't sufficiently focussed. This again proves your 200 day indicator as being the best pick of the bunch, it seems, using another different perspective. Roger, if you ever did write a book on your thoughts on investing I'd try to make it to your book signing or at least have a copy ordered in advance.
In regards to the price of oil I totally agree it's likely to come back down towards the end of the year. Political (well, election anyway) points aside I can't see how the current demand destruction can continue at it's present pace but the effects will surely last for some time. Then again we could see the biggest drop in gas usage this summer for many a year - that'd be a nice fillip to the rampant consumerism and environmental damage we've seen, globally, of late.
thanks for the kind word. while I am obviously very comfy with the 200 DMA let's avoid any confusion that indicator is not mine. I lifted it from a Jim Stack article from Smart Money mag in what i think was 1993. I am unlikely to "invent" anything and hopefully I am smart enough to not try to reinvent anything either!
Roger, and others. We now live in the information age; the internet, 24/7 news, etc. There are also many more financial do-it-yourself-ers, such as myself, than ever before. Do you think this may have any effect on the current bear market; shallower or deeper, longer or shorter? Thanks, JCarr
When the market has someone with Goldman's credentials calling for $150 oil, I think it almost becomes a self-fulfilling prophecy for traders.
JCarr, i don't really have a sense for the reality of that premise but my reaction is that if what you ask about were to pan out that two years later no one would remember.
JCarr,
I, for one, believe that the "cycles" we so often refer to will speed up because of the proliferation and access to information. "Back in the day" it took socializing for people to discuss the fact that the store down the street was having a sale and for everyone to get in on it. Now we get email alert blasts before the sale ever begins.
This, of course, is a philosophical discussion but it is my opinion that the clock times on booms and busts will be increasing exponentially as more and more people throughout the world begin to invest (and have access to invest) in the same things (commodities, enegry, etc.) and communicate in a faster way. You can let your imagination wander as far as you like here on the possibilities.
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