What happened last week.
What we're watching for next week.
Chart 1. S&P periodic returns.
This Week
Last Week
Chart 2. Distance from Key Markers
This Week
Last Week
Charts 3-4-5 The bull market in 3 acts
This bull market is now in the history books as the longest on record, by some measures. It's 9.5 years long so far, which is great, but how much oomph does it have left? That's a more relevant question, to me, than how long it's been going on.
So I divided the 9.5 years into 3 parts, which I call Acts. You can clearly see the waning power and momentum as time has gone by. Food for thought.
As is usually the case with a new bull market, the first act is the most powerful. In this case, the market rocketed up 102% in the first 3 years from 2009-2012. Many investors were so traumatized by the 2008 market crash that they didn't have the nerve to get back in during this first act. That was a costly misjudgment. Next we look at Act 2.
The second act, from 2012-2015, was only half as powerful as the first. By this time most of the traumatized investors mentioned above had gotten on board, but not all of them. Not by a long shot. Next we look at Act 3.
We are now in Act 3 and you can clearly see the loss of momentum and power. The gains for the three acts have gone from 102% to 49% to 36%. This shouldn't come as a surprise, because for one thing, it's a feature of the laws of compounding.
More importantly, perhaps, is the fact that there are fewer and fewer buyers coming into the market at this point. There are a few leftover trauma victims from 2008, plus new money coming into play, plus foreign money seeking safe haven in a strong dollar economy.
In any case, I think it's safe to say that this bull is looking tired in its old age. It can keep going up for longer than anyone expects, but I don't believe we will see a shift into a higher gear. In fact, I can hear the gears starting to grind just a little.
Chart 6. The Market Dashboard
Final Thoughts
This week I'm watching the mini-meltdown in Emerging Markets, for signs that it might spill over to the rest of the global economy. I'm especially interested in what's happening in Italy, which could conceivable go the way of Greece. If that were to happen, the ripple effect would be much worse than what happened when Greece nearly collapsed a few years ago.
I'm also watching the weakness in the tech sector for signs of a permanent loss of leadership from this group. So far it doesn't seem very bad, but that could change.
Bitcoin and its cohort continues to bring pain to investors. Where is the bottom? I know one thing for sure... it wouldn't be a good idea to step up and try to catch that falling knife. It's looking more attractive now, price-wise, but I would like to see at least a bounce or two before I even think about taking a swing at it.
As always, if you like what you see, or have suggestions for improving this recap, leave a comment below, or email me at info@zeninvestor.org