Signs That the Market Has Turned up
By Saghir Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities.)
Briefly mentions the nine bear markets that have occurred since the mid-1960s. In the past, bear markets have lasted for nearly a year or longer. Interestingly enough, however, the last two bear markets were over within less than 3 months. As a matter of fact, some will argue that the crash 0f 1987 and the decline of 1990 weren’t really bear markets at all. At this point it becomes a matter of your definition of a bear market. Let’s stick for now with the description of Dow decline over 20%. What you are looking for are great times to add to your holdings. Those who brought during or anytime soon after the crash have been amply rewarded for their bravery. Investors who followed the 20% rule for buying stocks in 1990 would have purchased stocks within 1.2% of the Dow’s eventual closing low.
A pause in a long-term mega growth trend from post –World War II to late 1960. The end of the growth stock-era –higher interest rates and inflation rates start to accelerate. The grandfather of all bear markets since the Great Depression-higher interest rates and inflation - the buying opportunity of a lifetime. Blue chips decline, but growth stocks do well.
Super-high unemployment, long deep recession as record high interest rates are used to combat double-digit inflation.The great Crash of 1987-a bear market or super bull market correction of temporarily overvalued stocks.
Relatively mild, believes severity short term bear markets belies of first economics contraction following the longest post –World War II expansion. We all remember dot com bubble.
Once the important law has been reached (as demonstrated by the indicators discussed above), the market should be on sound footing and ready for another multi-year bullish trend. You should receive several signs that the market is back on its way up again. Things to look to in the approximate order they would occur include:
- Investment advisors start to turn bullish again.
- Volume swells dramatically on a number of very positive trading sessions.
- Advancing stocks greatly outnumber decliners.
- The Dow and other key indicators move above their long-term moving averages.
- Interest rates continue to drift downward –the Fed doesn’t want to abort a recovery attempt.
- GNPturns positive.
- Unemployment starts to decline.
- Many on the sideline now feel it is safe to buy stocks again.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investment. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
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