(This report was posted on August 5, 2010)
NOT
A BULL MARKET !
Robert O.
Welk RowTek
Economics
The
high weekly average
was 1559.28 for the week
ended October 12, 2007. For the week ended July 30 , 2010
the
average was 1107.62, down 29%. (A comparison with the decline in
1929 is shown in depression.)
A
bear market was
underway well before the financial collapse in fall '08. The bands on the chart were a simple
technical attempt to gage the
likely course of stock prices in the bear market which started in fall
2007. The bands
connected the peaks and
lows
during the downtrend underway from the peak through summer 2008.
Amazingly the upper and lower bands are exactly parallel. The
spread of the bands is the median plus and minus 5.5%, i.e., the early
volatility range. The slope of the
bands is minus 15% per year.
All the weekly averages were staying within the bands until the week
ended October 3rd '08 which dropped 5% below the bottom
band. Following that breach
of the bottom line, the weekly average dropped to the
low March 6, '09 week (695.19), 37% below the bottom line. The recovery
which followed continued until the average broke through the top band
in December '09. At that point the two-year bear market was
over. The sharp drop and recovery during '09 was a reaction to
the financial collapse within the bear market. It was NOT a Bull Market !
Since the end of the bear
market there has not been enought time to establish a firm trend in
stock prices, but the recent direction
has not been favorable. The recent high was April 23,'10 when
the weekly average was
1207.32. On July 30 it was 1107.62, down 8%. If the stock market
is
really a discounting indicator, it is not signalling anything favorable.
END
Copyright © 2010 RowTek
Economics. All rights reserved.
BACK
TO MAIN PAGE