ETF Investors - Investing Stocks

ETF Investors: Why The Stock Market Is Flashing Warning Signs

It is been my belief that stocks and the economy have been locked in a secular bear market since March of 2000. During that period we?ve had two recessions and two cyclical bear markets. One of those recessions was the worst since the Great Depression and the last bear market in stocks was the second worst in history.

I?ve said all along that printing money will not cure the problem we?ve gotten ourselves into. It?s never worked in history and it?s not going to work this time either. We can?t solve a problem of too much debt with more debt. All we will accomplish is to make the problem bigger.

We are now fast approaching the period when the next crisis should arrive.

On average the stock market suffers a major correction about every four years. In a secular bear market that cyclical trough arrives as the economy sinks into recession and a stock market bear bottoms out.

The last four year cycle bottom formed in March of 09. That just happened to be the longest four year cycle in history. I?ve noted before that long cycles are often followed by a short cycle that compensates for the extended nature or the prior cycle. If that?s the case then the next four year cycle low is due sometime in 2012. (My best guess is in the fall.)

As we are still in a secular bear market then the move down into the four year cycle trough should correspond to another economic recession and cyclical bear market for stocks. Bear markets tend to last about a year and a half to two and a half years. If the next four year cycle bottoms in the implied timing band then the current cyclical bull should be topping soon.

As a matter of fact the stock market is already flashing warning signs. Three of the largest and most important sectors in the S&P 500 (NYSE:SPY) have not confirmed new highs.
 

Another warning sign; Despite record earnings the market has only been able to move to marginal new highs and is now in jeopardy of reversing the recent breakout.

I?ve noted in the past that this is how major tops and bottoms are often established. Smart money sells into the breakout, or buys the break down in the case of a bottom.

Tags: buys-the-break, case, cyclical-trough, economy, fact-the-stock, problem, secular-bear, since-the-great, spy, stock, stock-market, time, year

Source: http://www.theinvestingstock.com/trading_data/etf-investors-why-the-stock-market-is-flashing-warning-signs/

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