I wanted to send out a copy of my latest letter that I write to my clients. This will give you a good idea as to where we are right now. Let me know if you have any questions.
The Anatomy of a Bear Market
The big debate amongst analysts as you might guess is whether or not we hit a bottom in December and the market has gone up from there. Well, I showed what the financial crisis bear market looked like and there were 9 big moves both up and down. As a refresher here is what it looked like.
Let’s look at 2000-2002 (The technology bust bear market):
As you can see, there is not a whole lot of difference between the two with the exception that the technology bust took 11 moves versus 9 moves for the 2007-2009 financial crisis.
So, where we are today?
The blue line on the graph is the line in the sand. That line answers the bear market question. Above that line there is no bear market. Below that line there is a bear market. Of course, that is based on probabilities. So, here is where we are at this point.
No Bear Market- The worst is over, and we continue to go up from here
No Bear Market - We go back to that line and we don't go below it or stay below the line and recover and go up from here. That blue line would be the end of the decline.
Bear Market - We go back down to that line and fall below it and DON'T recover. Then there is a high probability that we are in a bear market.
If I had to assign probabilities of it happening:
Due to many factors, I give the edge to this being the start of a bear market. However, close to that chance is #2. The very least probability is that the decline is over. I would be completely shocked.
What is the timetable?
I would speculate that anytime between today and the end of January we should get an idea as to the real direction of this market for 2019. If there are any questions, please let me know.