Targeting a Bear Market Bottom

I've long said that we have an unprecedented opportunity coming up, the market takes its time and tops are notoriously volatile. The 2007 top took 8-9 months to fully materialize. Right now we are not in a comparable situation as I stated last night in my very looong post, because the market is artificially high due to Fed monetary policy. Take away that monetary policy, which is what the market has been discounting the last several months, and we get a nearly instant plunge as compared with past tops that have progressed without artificial backing from the Fed.

I mentioned a target on the Dow 30 that could be sub $5000. I just read that Russell Napier gave an interview in which he thought the S&P would see lows of $400!!! That's a 70% decline which would put the Dow around $3700. At that point the real risk and the one that I believe we will see in the next several years is that of a secular bear market, which is just a way of saying a long term bear market. We've been in a secular bull market in equities for approximately 3 decades. No one alive has ever witnessed a secular bear market in equities, sure we had stagnation through the 1960's-1970's, but not a secular bear.

This is where I see an opportunity in equities like we've never seen and that includes the 90's tech revolution. Furthermore, I can tell you that from my years of publishing Trade-Guild and my years teaching technical analysis in the adult education classes, people have an inherent fear of trading the short side. I did most of my learning during the 2000 tech crash and became comfortable selling short and saw the benefits of short selling back then. It's a chance to make money a lot faster and the trade isn't crowded. It's a pure sheep slaughter!

In any case, we have some time and while opinions and speculation are fine, we still need to listen to the message of the market and readjust when need be.

I just thought it was interesting that Mr. Napier along with Albert Edwards shared a view that was even more extreme then my long term views.

The interesting thing is I made these projections over 5 years ago when people were still screaming Dow 20,000! Less then a year later the market plunged over 50%. The US has kicked the can down the road for way too long. Remember when Social Security was the hot topic? We're way beyond that being our biggest concern.