Monday, February 8, 2010

What crash history tells us to expect for 2010

From Clif Droke:

Stock selection in 2010 will become more important as the sectors showing only the best relative strength, forward momentum and earnings growth should be favored over weaker sectors. The coming year is likely to reward good stock selection as opposed to the “buy with both hands” strategy that played out so well in 2009. Market timing will also be more critical in 2010 as opposed to last year since there are two major cycle bottoms scheduled this year: one in the first quarter of the year and one around late September/early October (namely the 4-year cycle).
With the most recent bear market almost one year behind us, we’ve seen an extended market recovery since March 2009 with nothing worse than a six percent correction along the way. Our historical survey tells us to expect more headwinds in 2010 due not only to the above mentioned cyclical factors but also to the fact that the market will be running into more overhead resistance. Volatility is almost sure to become a bigger factor in 2010 than it was in 2009 and history shows that the second year following a market crash is nearly always more variable and bumpy than the first year. The two major cycles scheduled to bottom at various points in 2010 will be a factor in producing this anticipated volatility.

While the second year ( 2010) normally shows a gain for the broad market averages, the gain is usually considerably less than the first year ( 2009). At worse, the market trades in a more or less lateral trend and closes largely unchanged on a year-over-year basis. Accordingly, technical strategies that utilize trading range opportunities will be important in the year ahead.
What can we expect of the gold price in 2010? Using examples of market history as our guide we can see that gold didn’t always perform as well as stocks in the second year of a post-crash recovery. The years 1976, 1989 and 2000 are examples of this. What’s interesting to note, though, is the impact the 4-year cycle tends to have on the gold price. The 4-year cycle scheduled to bottom this year typically increases demand for gold in the latter half of the year due to the financial market volatility it creates and even more so during the “hard down” phase of the 4-year cycle. This can be seen in 1974, 1978, 1982, 1986, 1990, 1998 and 2002.

http://clifdroke.com/articles/jan10/101810/011810.html

11 comments:

  1. http://www.cnbc.com/id/35289243

    GS Helped push AIG over the edge...when is something going to be done about these bastards??????? TXblondie

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  2. Watching CNBC and really getting irritated. Steve Liesman is a moron. Also, there was another idiot on from CNBC Europe, that was talking about increasing GDP by increasing gov spending. The problem is gov spending not the solution. I used to think CNBC was half way decent, but all they do is cheer lead for Obama. Probably by mandate from Zucher
    Jeff

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  3. I think reading such kind of blogs actually makes on aware of the possibilities which one needs to focus on in order to save the hard earned money.

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  4. TB it will never happen. The banksters are all sharks lurking in the water waiting for the first drop of blood and when they smell it they go for the kill.

    The only friends they have are living and dead presidents.

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  5. kli,

    Good old LCC doing well, now over $6.

    palmer

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  6. No clear evidence of miners move here...but no confirmation of friday's reversal.....bearish so far....

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  7. Analyze,

    Gap traders dream again for SWC, between 10 and 10.50, it gave you 0.50 gap, NICE, I like this market.

    palmer

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  8. Hehee....sorry can't play much working today

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  9. Palmer, tied up some today so inactive, action is corrective on SPY, I'll react to a range break per my note last night, otherwise have to side step here without a definitive move. Anyone that plays options was saved by not playing that whipsaw range today or chasing phantom breakouts. - Analyze.

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  10. Kli do you think this is P3....you keep focusing on miners but how about the 800 pt loss on the Dow could have been a great short.
    What do you see as happening next? SPY under 1000 is it possible.....straight line down and then pop? Have all covinced in P3?

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  11. I have my doubts that we get more than a hard market takedown here....dow 9500.......but could see the Snp test as low as 900......before they bring it up.....anyway it is so treacherous for shorts with GS in control that my shorts have been no more than day trades...gl

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