Here are examples of 7 bear market winning trades in two massive SP500 bear markets. Buying put options would easily have paid off the mortgage. And yes, there is a number 8 to consider. The stock market every now and then approaches a critical trend determination point. Will it be a bull or bear market. The price move from these levels will determine portfolio performances for the next 6 to 12 months.
If the bears have any conviction, they will be taking advantage of the recent lift in prices to buy put options at very cheap prices. The next 1 to 3 weeks will uncover the truth held by the Wyckoff Composite man, is he a bull or bear. Of course we think a bear. With ERCI making the call that the USA will be in recession soon, add Europe woes with a China slow down, then the SP500 over the latest 1x1 Gann Angle does not make sense.
For a close look at the current situation please review these blog posts.
Caution: We are watching everything closely, cycles still say bullish at the end of the year. But the degree and start of an upswing is never certain. If the bears are to take charge we guess the FXE (EURUSD) and the UUP will signal bearish action very early on.
Below is why Gann Angles rule over Trendlines. Gann Angles require only one point, and do NOT adjust when price push through.
UPDATE1: A study of the SP500 must done with intermarket analysis. A study of the FXE and UUP is required to determine a sea change is about to occur. The forex boys are more sensitive to Europe and US economic woes. (ref : US Dollar Gann Angle Trend Study is very important)
UPDATE2: As of today (20111018) the SPY jumped up on 2% on Europe Bank results (ha), prices will hit the Bearish 1x1 Gann angle. Thus making 125 to 130 an interesting place to watch for a change in market fortunes.
Consider that the last two times Achuthan leveraged his cycle research to make an out-of-consensus recession call were March 2001 and March 2008. After the first, the S&P 500 rose 14% to its 10-month average in May before falling 32% over the next 16 months. After the second, the S&P 500 rose 9.8% to its 10-month average in May before collapsing by 42% over the next nine months.
The reason for the lag is that ECRI's calls come early. That's why they are called "forecasts" rather than "observations." If the past two examples provide any guidance, the current rally has a shot at rising to the 1,230 to 1,280 level of the S&P 500 before turning tail. On Wenesday, the index closed at 1,209 after falling by 1.3%.
COMMENTS: SP500 hitting 1250 to 1280 would be right on the bearish Gann Angle. Works for us!
UPDATE4: Please review this post Revisiting the 1937-1942 Analog
Members who wish to consider this bearish play: Please review stocks with Ys and Zs in the Swing Scanner with negative RTTTrendPower levels and other bearish trend statistics. Take a close look at the Morgan Stanley Market Cyclicals components.
SP500 Bear Market 2000-2002
SP500 Bear Market 2008