5 SEP 2009, Saturday

1. Reminder above...Hurricane Season is not yet over.
2. Despite all the rhetoric in the media and noise in government statistics, this bear market is unfolding as it usually does including the extremes in pessimism nearing the lows and optimism nearing the highs. Despite the recent five month rally the SPX is still 34% below its bull market high. The three historical bear markets that many are referencing are: 1929-1932, 1937-1942 and 1973-1974. The market lost over 50% of its value in all three bear markets, but they all ended differently. In 1973-1974 the bear market ended in 23 months, without an intervening 50% rally, and then struggled higher for the next several years. In 1937-1942 the bear market lost 50% of its value, rallied more than 50%, then retested its low three years later, (60 months overall). In 1929-1932 the bear market lost 50% of its value, rallied more than 50%, and then broke to much lower lows for an 89% total loss in 34 months. Take your pick! In every case, however, the bear market lasted longer than 17 months top to bottom. Expect a retest or break to lower lows as a distinct potential. The equity markets continue to remain very risky.
3. As long as the 1030 area holds the next leg down of the downtrend should follow.
4. The bulls are not going down without a fight.