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Author: BillyJohn One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 6326  
Subject: Re: Indices thoughts Date: 5/15/2001 11:07 AM
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Dear Squirrelly

I have just a couple questions

FTSE100
The resistance line looks near perfect, but why did you draw the support line to the low at the end of Dec, 00 low of about 6,000. Should this line not have been draw to the low seen in March, 01 of about 5,300. If the support line is repositioned you will see a completely different picture. The 6 week rally did not break the resistance, and is headed back down to support. The rally was too much, too fast, it was bound to fail.

DOW
Again the resistance line looks perfect, but the support line is in questions IMO. Per your chart support was broken in March, 01. The support line was not just broken it was shattered, destroyed beyond repair, IMO. Question should be support line not be redrawn?

NASQ
You got this chart near perfect IMO, and agree the 2,200+ support / resistance line is important, but it has not been broken yet. You have two sloping resistance lines. One a longer term connecting March, 00 and Sept., 00. The second is connecting Sept., 00 with peak at the end of Jan., 01. Question would this second resistance line not be better drawn to the peak in the Beginning of May, 01. This would also add more support to the 2,200+ line. I would like to see one additional support line, drawn from the May,00 low and connected to the low in the beginning of April, 01.

I am not an eternal bear, I'm an old fart. I've been in the market for over 30 years, but studied 10 or 20 years data before that so I could make decisions when I started. So I've got about 50 years of confusing data floating around this feeble brain of mine. One problem we have with this market is, the majority of the players are young whipper-snappers, that have never experienced a true bear market.

There was an old link that I've lost, that showed 200 years history of the market. It showed all the bear and bull market for the past 200 years. The shortest bear market was just over 8 years long. The longest bull market was approximately 20 years long. Again to repeat myself, there has NEVER been a bear or bull market that has lasted less than EIGHT (8) YEARS! Of course there were corrections in bull markets, and rallies in bear markets, but the bottoms was NEVER met until AT LEAST 8 YEARS PASSED.

Please do not get me wrong. I am not saying that this bear market will last 8 years and then we will start a new bull market. I saying that NO BEAR OR BULL MARKET HAS TOPPED OUT OR BOTTOMED OUT IN LESS THAN 8 YEARS, OR MORE THAN 20 YEARS, I'M SAYING WE ARE IN A BEAR MARKET AND TO PLAY IT THAT WAY. Go long on the rallies, but keep it short term. So short at the failure points, or buy puts. But don't think the bear is dead.

I realize this is a technical analysis board, but what is technical analysis but looking to the past and looking for patterns, support, resistance, trends, etc. I believe in technical analysis because history does repeat itself. We learn from history, and this old fart has been buried when he forgets to remember that people don't change, they keep repeating the same old mistakes.

One other post that was fantastic was by ASSAYE in Sept. 00, the link follows

http://boards.fool.com/Message.asp?mid=13326541

There are a whole series of posts connected to this post. You can find them by searching the fool with “Sign of the Bear”. Many didn't believe it because we were in the middle of a bear rally, but history told us to watch out. It might be a good idea to get an old chart of the DOW starting around 1920 to 1940, draw you support and resistance lines, based on the peak and then 1 year later, then redraw them 2 years later, and maybe 3 years later. I think what you will find is very interesting.

Since this post was started by a Brit, across the pond, I claim my right to continue standing on my soap box in the middle of this square. It's OK if you walk away and don't listen, you have that right also. But ...............

TIME FOR FUNDAMENTAL ANALYSIS

Please no rocks, just tomatoes and eggs.

I use to have a chart of PE's going back 100 years but it's lost. This link will have to do.

http://www.decisionpoint.com/ChartSpotliteFiles/010331SPPE.html

If I could find the old 100 year chart you would see that there were only 2 extended times that PE's exceeded 25, one was in the 90's and the other was in the 20's. Historically PE's have remain in a range of 10 to 20 about 90% of the time for the past 100 years. During times of great prosperity and great expectations PE's have gone above 25, during periods of low expectations the PE's dropped below 10. Question Do you have great expectations for the next year, or low expectations, or do you feel that we will be all right and the economy will turn around and increase moderately?

The current PE (05/11/01) levels for the various US exchanges are
NASQ 223.6
AMEX 32.6
NYSE 30.2

These PE's are based upon Friday's closing prices and the Trailing Twelve Month Earnings per share. The above numbers tell a major piece of the story. The reason we buy stocks is to make money, more money than we can get from bonds and banks. After a decade of expansion it takes time for people to readjust there thinking back to reality. It will take a great deal longer for the economic impact of the slowing WORLD economy to sink in.

During the 90's it was declared to be a “New Era”, the business cycles were dead. The majority of the people in the market have never experienced a true bear market. They have only seen short corrections to the bull market. With less than 20 years experience and only a bull market to guide them, it is going to take years for them to learn. History does repeat itself, that why we use technical analysis. The EV people have it right, cycles or waves have always been true, but occasionally they forget about the longer wave cycle.

Bill
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