US bear markets

My technical analysis on Parkson receives a lot of attentions. Most yawns at my big picture talks but suddenly many got very excited when I talked about some technical analysis yesterday, perhaps scarcity makes the trick. To be honest, I'm not very heavy on TA because it discounting past and current information and tells me a little about market sentiment. Nothing more, nothing less - not much about the future.

I am going to share with you all on my observations of a few severe bear markets. So, let's get started.

Let's start with the famous 1929 crash.


(click for larger image)

Any chartist can tell you that October 1929 was the capitulation as you have hanging man, high volume and lost of 40% from the top. Wrong! You will be in deep sh*** if you put 100% of your money thinking of making a big bet. The market killer back then was a psycho who loves to torture his prey slowing and painfully. The second capitulation was a slow death - 11 months of blood letting until the final capitulation came in. Volume was very thin, no liquidity or no confidence? I think both.

1973 and 1974. Dow lost about 40-50% but I like this killer, he finishes his target fast. Once it enters the bear territory, the whole torture was completed within 4 months and a 5-year new bull run was born.



Tech bubble. It was a long bear market - 3 years. I don't like to die this way. This killer is also a psycho. She first put three bullets on you - left foot, right shoulder and one on your right chest. She let you run and crawl for 10 miles and put one more bullet on your left foot. So you crawl another 2 miles and finally she finishes you off - the bullet went through your heart on March 2003. There are multiple capitulations.



Now back to 2008. Given the severity of the credit crisis and economic problems but at the same time the central bankers around the world are acting at breakneck speed, I am leaning towards on multiple capitulations if the market don't U-turn within 30 days or no response when big stimulus package like another US $ 500 billion being announced. 8,000 is the line has been drawn on the sand, if the bear manage to cross after a few rounds of fights(despite most think Oct 10 was the capitulation), see you at 7200.



At 8,000 level one cannot completely in 100% cash. If you miss the U-turn, you are going to miss it very badly. Let's say the market did go down to 7,000, your downside is only 12.5%. If you are 50% invested, when it go down to 7,000, you put down another 50%, your average cost is 7,500 and enjoying potential rally of 40-50% later. Sitting on the side-line deciding on timing to put additional 50% was what I meant wait.

Don't obsess with the hanging man, doji star, bearish engulfing, etc, trust me - I have been down to this path before - you cannot make big money this way. You make money by riding on the big rise(make sure you have underwear and parachute with you)!.

PS, Chartist, please don't be offended, I don't reject knowledge, all I am saying is look beyond charts. After all, if you look at my works, I can be a trained chartist, don't you agree? Hee hee, have a nice day!