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To be or not to be, that is the question;
Whether ’tis nobler in the mind to suffer
The Slings and Arrows of outrageous Fortune
Or to take arms against a sea of troubles
Who knew that Shakespeare had a handle of our current state of emotions way back in the seventeenth century?
Okay, so perhaps this interpretation of the famous lines from Hamlet is not in line with what we may have been told in school. Fair enough. But you have to admit that though farfetched, we as traders in this tumultuous market, could interpret the “to be or not to be” as whether we should BE in this market or not.
If nothing else, we can certainly empathize with the sentiment. It has been rough going for much too long and many people—myself included—have gone a little stir-crazy.
The question on many of our minds is: Have we reached the top of the current bull market?
Well, I have gathered together a list of thirty-four—yes, 34—reasons that I believe we will in fact go higher. Take a look at the evidence:
1. The S&P500 currently has a current Price/Earnings ratio of 14 and a forward P/E of 16.7. The S&P500 has never—ever—topped with a P/E at these low levels!
2. A bear market is defined as any market in which prices exhibit a declining trend and fall by 20% or more from peak to trough. So by definition—as just stated—the Market is not and the S&P 500 has not reached “official” Bear Market status.
3. Historically, high short interest—an indicator of investor pessimism in the market—has always marked transitions from down markets to up markets. The highest short interest ever reported (by The NYSE Group) was on February 29, 2008 with over 14.9 billion shares short.
4. The American Stock Exchange® (Amex®) member and non-member organizations, also reported the highest short interest ever, with short interest, as of the February 29, 2008 settlement date of 1.25 Billion shares. Just one-year prior, the short interest totaled 750.6 million shares.
5. NASDAQ reported its second highest short interest ever at 9.25 billion shares as of February 29, 2008. The highest ever short interest in the history of the NASDAQ was August 15th 2007 at the major market low leading into the massive six-week rally that ended with market highs at the end of October 2007.
6. The Advisors’ Sentiment Report is a survey that has been widely adopted by the investment community as a contrarian indicator. Since its inception in 1963, this report has had a consistently good record for predicting the major market turning points.
Each week they survey some 140 financial newsletter writers to determine whether they are leaning bullish or bearish and compile the data to arrive at a weekly percentage of bulls vs. bears. Extremes in either direction are signals of reversal of the market's current trend. The last time the percentage of Bears was this high and the percentage of bulls this low was the bottom in 2002.
7. The lower the Bullish Percent is, the fewer stocks there are that are giving buy signals. (A general buy signal is when the index is below 30%). It is a very accurate indicator of major market bottoms.
When the market plunged on January 22, it hit 15.92 on the NYSE and 16.92 on NASDAQ. The last time it hit anywhere near that low was in the first week of September 1998, which was the bottom heading into the NASDAQ 5000+ rally. But even when the market plunged last Friday to within shouting distance of the S&P500 uptrend line, the NYSE Bullish Percent index remained up at 29.22% — far above its January 22 low of 15.92%.
8. A market bottom is typically marked by a dramatically greater number of new lows than new highs. The $NAHL (NASDAQ new highs/new lows) bottomed below -900 on January 22. The last time that low was approached was in 1998, leading to the historic rally to NASDAQ 5,000+. Even on Friday's big dip, the ratio only went to -225, substantially above the low of January 22.
9. Not surprisingly, another market breadth indicator, the $NALOW, (Nasdaq New Lows) hit record highs, above 900, on January 22. The only other time they reached those levels was in 1998, prior to the NASDAQ 5000+ rally. Fast-forward to last Friday, when indexes took a big hit, the indicator high was only 239.
10. Another typical bottom marker is a dramatic spike in volume on the exchanges at the market inflexion point. On January 22, 2008, every exchange and index recorded its highest volume ever in the history of the stock market.
Click here to uncover the rest of the glaring evidence against further market downturn that I have laid out for my Trending123 subscribers.
As I have stated in another one of my reasons—which you can get to here—the S&P500 is following a 30-year uptrend line that has NEVER been broken. However, since January 22, 2008, it has twice approached this trend line. In neither case did it cross.
Instead, Ben Bernanke took decisive action to ensure that the line held. He will continue to do so until at least the November elections. So today you can surely expect some drastic action on his part to prevent as much further damage to the market as he can.
I’m betting he is just as bothered by the turn of events as we are and does not want to see us slip any further!
No doubt about it—this market has thrown us some terrible curveballs. But my advice remains to be smart and play it cool. It may not get easier any time soon but I am not about to throw in the towel…not even close! What I am telling my subscribers to do right now is…
Sincerely,
John Lansing
Trending123
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