FullyInformed.com

Market Timing / Market Direction – Trick Or Treat?

Oct 28, 2011 | Stock Market Outlook

Market Timing is all about getting into the market for profits and getting out to protect those profits. Market direction is all about taking those timing indicators and knowing whether the next move is up or down in the overall markets.

One of the interesting aspects of market timing and market direction is sifting through recent history to find similarities and then wonder is the same thing is about to happen.

Market Timing / Market Direction Oct 11 2007 to March 17 2008 – 20.2% loss

On October 11 2007 the S&P made a new all time high of 1576.09 but my market timing indicators did not support the move higher. The next day the market commenced a sell-off which had its first major leg down end on March 17 2008. The loss for this first leg down was 20.2%.

This drop took a total of 6 months.

My market direction outlook did not change until later in May 2008.

Market Timing / Market Direction - Oct 11 2007 S&P high

On Oct 11 2007 the S&P made a new all time high before selling commenced.

Market Timing / Market Direction March 17 2008 to May 19 2008 – 14.5% gain

March 17th marked the end of that decline and the market direction changed as the S&P rallied strongly for two months ending with a 14.5% gain on May 19 2008. This market direction change fooled most analysts who believed the market had recovered and would challenge the Oct 11 high.

Instead the original 20 % decline should have told investors that a bear market was well underway.

My market timing indicators changed to positive after two weeks into the rally and turned indecisive by May 19 2008. They did not pick the top on May 19 2008 but two weeks later they went solidly bearish and remained bearish throughout the 2008 collapse.

Market Timing / Market Direction - First Bear Market rally of 2007

The climb back from the March 17 2007 low marked the first bear market rally of 2007

Market direction changed again and on May 19 2008 a drop commenced to a new lower low. There was no doubt this was a bear market. What followed from here every investor remembers.

Market Timing / Market Direction - 2008 bear market chart

The second leg down in the bear market saw a lower low and a 16.65% loss.

Market Timing / Market Direction – The Bear Market of 2011 To Oct 28 2011

My market timing indicators have pointed to a market down for almost 5 months. It missed the top but never turned positive even with the rise in July. On May 2nd 2011 the recent bull market made the highest point for the bull market.

The collapse to Oct 4 2011 marked 6 months just like the first leg down in the 2007-2008 bear market and the loss was almost the same.

Market Timing / Market Direction - 2011 Bear Market

The recent rise in the S&P 500 has striking similarities to the 2007 bear market.

The rise from October 4 has been stronger than the rise from the March 17 2008 first leg down. However just as in the rise in May 2008, analysts are calling an end to the past 6 month bear market. Are they right?

My market timing indicators are showing that while the 20, 50, 100 and 200 day indicators are starting to turn back up, none have confirmed an end to this bear market. If this is a full-fledged bear market, then Oct 4 2011 marked the first leg down.

Market Timing / Market Direction – S&P 2010 Correction

The 2010 market correction was not as severe as the recent bear market activity. While the market timing indicators did show that selling was increasing as the market fell, they did not show the same degree of concern as this year’s bear market. The loss of 17.12% while on the high side of a market correct, did not reach the 20% true bear market territory.

Market Timing / Market Direction - 2010 Market Correction

The 2010 market correction was not as severe as the 2011 bear.

Market Timing / Market Direction – Similarities Between 2007 and 2011

While there are a great deal of similarities and for many investors almost spooky so, the markets are in my opinion quite different. With the S&P 500 in 2007 setting new highs, stocks were over-valued. Today earnings from the majority of companies in the S&P are higher than in 2007 and valuations on many are lower.

However the other striking similarities are the financial crisis, which has moved for the present to Europe from the United States. High unemployment plagues the United States and parts of Europe. The housing crisis has not ended in the US and in Canada housing today is more expensive in most major cities than back in 2007 while real wages in Canada have not kept pace with rising housing costs.

The sub-prime mortgage mess is still sitting on the balance sheets of US banks and the economy is not robust in almost every developed nation.

As an investor I have survived everything from the oil crisis of the 1970’s to 1980’s double-digit inflation and 1987 one day plunge to the savings and loans scandal, Enron, WorldCom, 9/11, Lehman Brothers, AIG, 2008 bear market collapse and now into the European debt crisis. Through it all I have stayed the course, but it is always interesting to look back and take a moment to check my market timing indicators to determine if the market direction is about to change. It is when looking back that as an investor I can spot some very striking similarities in both market timing indicators, market direction calls and the market itself.

Today, just like in May 2008 when it appeared the bear market had ended, my market timing indicators and market direction outlook remain indecisive.

Search

Select to view all results...

Generic selectors
Exact matches only
Search in title
Search in content
Post Type Selectors

Recent Outlooks

Stock Market Outlook for Mon Feb 24 2025 – Bounce Likely and Higher Close

Prior Trading Day Summary: On Friday stocks continued their decline which had started on Thursday. Volume jumped as the indexes fell lower and by the close the index was near the low of the day. The SPX saw 5.5 billion …

Morning Investing Strategy Notes for Fri Feb 21 2025

For FullyInformed Members the morning Investing Strategy Notes for Fri Feb 21 2025 review Thursday’s sell-off. Stocks discussed include Domino’s Pizza Stock (DPZ), Berkshire Hathaway Stock (BRK.B) and more. The morning Investing Strategy Notes are for FullyInformed Members.   Members …

Stock Market Outlook for Fri Feb 21 2025 – Potential Bounce But Lower

Prior Trading Day Summary: On Thursday disappointing earnings and lowered forward guidance from Walmart (WMT) ahead of the open, unnerved investors who just a day earlier had pushed the SPX to a new all-time high. Selling spread quickly and took …

Morning Investing Strategy Notes for Thu Feb 20 2025

For FullyInformed Members the morning Investing Strategy Notes for Thu Feb 20 2025 review the outlook for stocks after another new closing high on Wednesday. Stocks discussed include Toll Brothers Stock (TOL), Alibaba Stock (BABA), Walmart Stock (WMT), Texas Roadhouse …

Stock Market Outlook for Thu Feb 20 2025 – Overbought – Chance Of Lower Close

Prior Trading Day Summary: On Wed Feb 19 2025 the indexes squeezed out another small gain but the technical indicators are advising that the indexes are overbought. The SPX rose 14 points, matching Tuesday’s gain to close at a new …

Morning Investing Strategy Notes for Wed Feb 19 2025

For FullyInformed Members the morning Investing Strategy Notes for Wed Feb 19 2025 review the outlook for stocks following a new high for the SPX on Tuesday. There are a few stocks discussed including Toll Brothers Stock (TOL),  Carvana Stock …

Stock Market Outlook for Wed Feb 19 2025 – Choppy – Dip Possible But Still Up

Prior Trading Day Summary: On Tue Feb 18 2025 stock indexes traded in a tight range until the last 10 minutes when the SPX shot higher moving from 6112 to close at 6129, up 15 points, all of it in …

Morning Investing Strategy Notes for Tue Feb 18 2025

For FullyInformed Members the morning Investing Strategy Notes for Tue Feb 18 2025 review the outlook for stocks following the Presidents Day holiday. There are a few stocks discussed including Medtronic Stock (MDT), Wingstop Stock (WING), Apple Stock (AAPL), Analog …

Stock Market Outlook for Tue Feb 18 2025 – Morning Weakness Possible But Higher Close

Prior Trading Day Summary: On Friday Feb 14 US retail sales came in much lower than expected at -0.9% which was well below estimates and below the December reading of 0.2%. With retail sales showing some contraction investors decided to …

Morning Investing Strategy Notes for Fri Feb 14 2025

For FullyInformed Members the morning Investing Strategy Notes for Fri Feb 14 2025 review the outlook for stocks following a strong afternoon rally on Thursday. This was the strongest one day move up since Dec 24 2024. There are a …

Stock Market Outlook for Fri Feb 14 2025 – Up Signal – Higher

Prior Trading Day Summary: On Thursday the PPI numbers came in slightly below estimates which assisted stocks in moving higher after Wednesday’s stronger than expected CPI numbers. Comments in the afternoon from the White House on tariffs and their implementation …

Morning Investing Strategy Notes for Thu Feb 13 2025

For FullyInformed Members the morning Investing Strategy Notes for Thu Feb 13 2025 review Wednesday’s choppy trading and the outlook for today. There are many stocks discussed including Occidental Petroleum Stock (OXY), Tesla Stock (TSLA), Dutch Brothers Stock (BROS), Applovin …

Stock Market Outlook for Thu Feb 13 2025 – Unconfirmed MACD Down Signal

Prior Trading Day Summary: On Wednesday inflation fears rose again among investors as the Consumer Price Index (CPI) for January came in higher than estimatedand above the prior readings. Stocks opened considerably lower to start the day but spent the …

Morning Investing Strategy Notes for Wed Feb 12 2025

For FullyInformed Members the morning Investing Strategy Notes for Wed Feb 12 2025 review trading action on Tuesday. Stocks discussed include McDonalds Stock (MCD), DoorDash Stock (DASH), Coca Cola Stock (KO), Merck Stock (MRK), Tesla Stock (TSLA), IWM ETF, Robin …

Subscribe For The Latest News