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Sunday, November 23, 2008

Bear Market Update - Down 53% from the Peak

The statistics and charts below show the S&P500, DJIA and NASDAQ are currently down 52%, 48%, and 54%, respectively from the top.

Don't be fooled by any new "buy signals" or talk from Bob Brinker saying he is working to "identify a bottom" in this bear market. Bob Brinker was wildly bullish at the top. He had his "balanced Model Portfolio #3" 66% in equities at the top while his Model portfolios #1 and #2 were 100% in equities at the top with "dollar cost average" new money except for several "buy levels" where he advised putting it all in at once.

He also told his subscribers who had any "new money" that the mid 1400s was a "gift horse buying opportunity." About a year ago in his December 5, 2007 Marketimer newsletter with the S&P500 at 1481, Bob Brinker wrote:
The short-term correction that began in October and continued into November has served as a health-restoring pullback and has paved the way for new record highs in the S&P500 index


Marketimer subscribers have been able to add to positions on this short-term correction based on our recommendation to view the stock market as attractive for purchase on any weakness into the mid-1400’s range.


"We continue to believe that a bear market is not on the radar screen at this time. We expect the bull market to continue at least well into 2008, and look for significant stock market gains."

Finally, he wrote

We continue to rate the market as attractive for purchase in the mid-1400’s… Any additional weakness below this range is regarded as a gift horse buying opportunity.
Needless to say, Brinker rode a 53% (so far) bear market down fully invested with no cash raised via profit taking at the top to buy equities now that they are 50% off.

2007-2008 Bear Market Statistics 11/23/08

S&P500 Chart
Last Market High 10/11/07 at 1,576.09
Last Market low 11/21/08 at 741.02
Current S&P500 Price 800.03
Decline in Points = 776.06
Decline in percent = 49.2%
Max Decline = 53.0%
=>This means the decline from intraday high to intraday low is 53.0% and we are currently 49.2% off the peak.
=>The decline in the S&P500 from the closing high to the closing low was 51.9%

DJIA Charts
Last Market High 10/11/07 at 14,279.96
Last Market Low 11/21/08 at 7,392.27
Current DJIA Price 8,046.42
Decline in Points = 6,233.54
Decline in percent = 43.7%
Max Decline = 48.2%
=>This means the decline from high to low has been 48.2% and we are currently 43.7% off the peak.
=>The decline in the DOW off the closing high to the closing low was 46.7%

Last Market High 10/31/07 at 2,861.51
Last Market Low 11/21/08 at 1,295.35
Current NASDAQ Price1,384.35
Decline in Points = 1,477.16
Decline in percent = 51.6%
Max Decline = 54.7%
=>This means the decline from intraday high to intraday low is 54.7% and we are currently 51.6% off the peak.
=>The decline in the NASDAQ off the closing high to the closing low was 54.0%

Not everyone was as wildly bullish as Bob Brinker at the top. Some of us took profits[Oct 2007 Take Profits Alert (pdf)] and had significant cash reserves so we can go shopping now with these 50% off sales.

Like anyone who invests in the stock market using asset allocation, I am down significantly from the peak. I don't pretend to time the stock market. The good news is that by taking profits and some good stock selection, my "newsletter explore portfolio" is through today still
  • up 28% from the 2002 bear market bottom and
  • up 82% since 12/31/98 while the S&P500 is DOWN 24% over the same period (12/31/98 to 11/23/08.)
To learn what I have been buying, including two buys on 11/20/08, the day the market made the intraday low so far for this bear market, subscribe to Kirk Lindstrom's Investment Letter.

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