Is wall street turning into a bear market

If a bear market is typically defined as a succession of lower highs and lower lows, it might be worth noting that the S&P 500 recently put in a lower high.
 
room305 said:
If a bear market is typically defined as a succession of lower highs and lower lows
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Is it typically defined as this?

I've never heard of that. I thought it just was a lengthy period where prices were declining, whichever way that may happen.

That lower/higher high/low stuff sounds very mystic meg technical charting babble to me

I've never seen a recovery from correction suddenly blast back to it's previous high anyway, so you'll generally get a lower high. Not that I believe that it means anything!
 

A lengthy period of price declines is easy to spot in retrospect. The lower highs/lower lows definition helps to filter the noise. Whatever you may think about the predictive powers of technical analysis and tea-leaf reading (I have my doubts too) it still serves a purpose. Even Peter Lynch advises selling when a stock falls below its 200-day MA.

A correction recovery is unlikely to immediately blast back to new highs but if it consistently fails to close above the old high (or 'peak') and then falls to even lower than the previous correction level it starts to look much less like a correction and far more like a 'top'.

I am nowhere near beating the drum yet but I am watching with avid interest. Sentiment has remained decidedly bullish as well, which is never a good sign. In any case, for a value investor like yourself whathome, bear markets could be more aptly named "opportunity markets" ...
 
room305 said:
bear markets could be more aptly named "opportunity markets" ...
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Yep, bear markets don't come frequently enough. During the recent dip I was able to increase my position in a few long term favourites. One problem I've encountered over the past few months is private equity funds taking over two of my holdings.
I hold 14 common stocks and it's frustrating when you have spent weeks or months on analysis only to have your investment swiped. So you make 25% in one day but then you're holding cash which has to find a new home.

Valuations don't look stretched to me at the moment so I'm still happy to buy when I can take advantage of irrational negativity.
 

I am surprised you do not take valuations look stretched. What are you basing that on?

From my perspective a long bull run combined with a limitless supply of cheap and easy money has stretched the valuations of most companies. Still have one or two on my watchlist though and pulled the trigger on one yesterday as it fell following a broker downgrade.

I am aware of some value investors who have moved to inverse value strategies. Shorting companies that are outrageously overvalued. Need a neck like a Fianna Failer though, as overvalued companies very easily become even more overvalued. Also you have to pay the dividend while you hold the shares. Furthermore, private equity mania and expensive land valuations mean even abysmal companies can 'merit' high valuations.
 
room305 said:
I am surprised you do not take valuations look stretched. What are you basing that on?
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Primarily looking at my watch-list of about 50 companies but even the S&P 500 is trading at 16 to 17 times earnings which although not cheap doesn't look stretched to me.

Here's the S&P 500 earnings and estimates report as of 30/3/2007 (excel):
http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS

I don't hold any public Irish companies so I haven't looked at ISEQ valuations very closely.
 
whathome said:
Primarily looking at my watch-list of about 50 companies but even the S&P 500 is trading at 16 to 17 times earnings which although not cheap doesn't look stretched to me.
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Hussman has some good work on why such valuations may be flawed.


Don't forget, at the 1929 peak the p/e ratio for the S&P was at 15. This is not by any means to suggest that prices are massively overvalued and heading for a crash, just that they don't seem particularly cheap at these levels either.
 
room305 said:
This is not by any means to suggest that prices are massively overvalued and heading for a crash, just that they don't seem particularly cheap at these levels either.
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Yep, as I said, I don't think it's cheap but not overly stretched.

With regard to the Hussman link, I wasn't referring to forward operating earnings.

Of course I use price/earnings/growth when making an investment decision but that's on an individual company basis and as I mentioned previously, I usually ignore the indexes anyway.
 
... yesterday's rally brings the S&P to a 7 year closing high, above the Feb/Mar correction (a higher high). Probably safe to say the bulls are back in charge and the bears will be scampering back to their caves to lick their wounds and await the next correction.
 
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