Is the Cyclical Bull Over?

During every secular bear market there are cyclical bull markets. Don’t let this confuse you. It is very simple. Read on.

First let’s understand what a secular bear market is. As far back as you want to go in the history of the U.S. stock market there have been cycles of up and down. No one will deny that. See how easy this is. These long term cycles average out to about 16 years. Sixteen years (about) of the stocks going up followed by 16 years of stocks going down.

Did you happen to notice the long pull up from 1982 to 2000? Just about everything went up and every investor thought he was a genius. Even your broker and financial planner looked smart. Then ca me 2000. Ugh!

Why did the NASDAQ drop 78% and the Dow plummet 40%? In hinds ight everyone has an answer. My question is if brokers and analysts are so brilliant why didn’t they tell you to sell at the top instead of continuing to advise buying all the way down? The professionals sold and went short while the little guy sat there with his portfolio in his hand agonizing all the way down.

It is an unfortunate truth that brokers and financial planners are taught their trade by Wall Street brokerage house. Please remember they are not there to help you get rich. They are there to get rich off you.

Back to the cycles. Is there any indicator that can alert an investor to a major trend and especially a major trend change? The market seems so volatile with its daily ups and downs that it is almost impossible to buy an equity that will make money for you. Many investors are told the half story that they should buy and hold and not worry about the current price. That is obviously a half truth because when we look at history we see that half the time the market is going down and that is NOT when you want be holding equities.

There is a very simple method of determining major market direct. Forget the daily buys and sells. Forget the weekly buys and sells. Forget the monthly buys and sells. Step further back and look at the entire year. You want to see what has happened and what is happening for the past 200 trading days.

Go to almost any stock web site and enter the symbol one of the major indexes – the Dow Jones Industrial Average, the Standard & Poor’s 500 or the NASDAQ 100. On that web site you will be able to enter a 200-day moving average. When that line has turned up or is ascending the stock market is going up. If that 200-day line has turned down that is the top of the market and almost all equities should be sold.

Then WAIT. Do not buy anything. Keep you money in a money market account or a CD at the bank. When the line turns positive BUY.

If you will do that now you will know where your money should be.